Retail FDI can bring in $2.5-3 billion into India by 2017.

MUMBAI: The government recent decision to liberalize foreign participation in the country's retail sector has the potential to attract investments between $2.5 billion and $3 billion into the country over the next five years. A large chunk of this investment is expected in the food and grocery (F&G) vertical, according to Crisil Research.

"Capital expenditure in the back-end supply chain will receive a boost given the mandatory 50% investment clause," a report by the research firm noted.

On one hand, higher capex in the sector could benefit farmers as well as consumers. "An efficient supply chain will enable direct sourcing of fruits and vegetables, which will boost farmer realisations by 10-15% and still bring down retail prices by 15-20%," it said. Despite foreign entry, organized retail in the country would grow to a moderate 10% in the next five years, compared with 7% currently.

"Moreover, the share of foreign retailers in organised retail is not expected to exceed 10-15% by 2016-17," said Mukesh Agarwal, President, Crisil Research. "Even in China, where the sector was opened up to FDI 15 years ago, foreign retailers have a share of only 25-30% in organised retail," he said. On the opening up of the aviation sector to FDI, Crisil Research believes it would attract more serious global players into the sector in the long run. And this would mainly happen because of the size and growth potential of the Indian aviation market.

"However, addressing issues relating to taxes and levies on aviation turbine fuel will be critical to attract significant FDI into the sector," Crisil Research warned. The research outfit also warned that while the decisions were in the right direction, India's outlook in the near to medium term will be shaped by successful implementation of these measures.

Source : timesofindia.indiatimes.com