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Vaghela calls for FDI in textiles |
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2004-7-15
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The Union textiles minister Shankersinh Vaghela has said that his ministry will seek foreign direct investment (FDI) for textiles.
He informed, “But the final decision on this matter will rest with the Union Cabinet,” as the retail sector was in for a boom.
The textiles ministry’s strong view on the issue comes in the face of stiff opposition from the Left parties to the finance ministry’s proposal to increase FDI limits in the telecom, insurance and aviation sectors.
The budget presented by Finance minister P Chidambaram finds no mention of foreign investment policy for the retail sector, despite the fact that his predecessor Jaswant Singh had advocated the need to open the business to FDI before the NDA government lost the elections.
Apparel and garment industry will be one of the biggest beneficiaries of FDI in retail sector in the country.
Branded apparel sector’s demand is likely to go up at a healthy CAGR of 8-9% between fiscal ’04 and ’10, led by a growing population, higher disposable incomes, a favourable demographic profile and the emergence of organised retail.
Major retail chains like Westside, Pantaloons and Shoppers'' Stop with many others seem to be doing brisk business in garment retail. At the same time, a few foreign retail houses, which have made a backdoor entry through the franchise route, have not been able to make major dent in the segment.
FDI in the retail sector will prompt many global retail chains to set up shop within the country. For now, many global retailers, including Wal-Mart, have expressed their keen interest in outsourcing products, including garments worth $6bn from India.
Even as mandarins of FDI say that it will provide more opportunities to trade and create jobs, there are others who hold the view that financially strong retail giants would ‘blow away’ the small retailers.
Captains of the textile industry have also strongly favoured FDI in the retail sector in order to boost overall sales of garments. Sanjay Lalbhai, managing director, Arvind Mills had earlier, “Development of organised retail industry in India will help in creating the much needed ambience for shopping; this will help in shoppers spending more in buying different goods in the retail shop.”
He said that considering the huge volume sales from the big retail chains, the company has re-launched it low-ended ‘Ruf N Tuf’ brand of jeans exclusively through one of the biggest retail chains in the country.
‘Ruf N Tuf’ was withdrawn from the market few years ago due to poor sales. The size of retail market in India is estimated at Rs 20,000 crore, which is 2% of total world trade and was likely reach 10% in the coming five years. |
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