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India Inc cheers FDI Initiatives

The UPA government opened its retail sector to foreign supermarkets on Friday, a major economic reform that has been stalled for months by political gridlock in New Delhi.

The government also decided to allow foreign airlines to buy stakes of up to 49% in local carrier, a much-awaited policy move that provides a potential lifeline to the country’s debt-laden airlines by opening up a fresh source of funding. Here’s what India Inc had to say.

Sunil Bharti Mittal, Chairman and Group CEO of Bharti Enterprises
“The series of policy decisions announced by the Government today signal that India is on the move. They send out a clear message to the global investor community that the Government is committed to taking forward next generation economic reforms. More importantly, they will boost sentiment within the domestic industry and provide much needed momentum to the economy. I congratulate the Government on taking these bold decisions.”

Kishore Biyani, chairman, Future Group
“We are hoping this time the government will stick to its decision (allowing FDI in multi-brand retail) because that is absolutely essential. The decision to let individual states decide on whether they want it is a good decision. This should satisfy people who are opposing it. The industry is convinced once a few states implement it the others will see the benefits and definitely consider it as well.”

Sanjiv Goenka, chairman, R P-Sanjiv Goenka Group
“These steps were anticipated for a while, It is a welcoming move from the part of the government. Foreign direct investment in multi-brand retail is positive for Indian industry and retail sector. Through this, the government has put the country’s development back on track. The fact that the government moved ahead with this step is appreciable and this is a firm policy towards economic reforms.”

Venugopal Dhoot, chairman, Videocon Group
“What the government was unable to do in the last one year, it has done in one hour. So the government policy paralysis is all over. We are expecting at least $15 billion to come in multi-brand retail alone. Videocon has a large exposure in the retail space and we have been looking at foreign retail partners who will now be able to come. Foreign investment in retail will increase competition, bring prices down and is good for the customers.”

Adi Godrej, chairman, Godrej Industries
“I think these developments are excellent as this shows that the reforms have restarted and this also implies that the GDP growth will improve and increase employment. By increasing prices and lowering fuel subsides, the government has sent out a strong message. Foreign investment in multi-brand retail, various sectors will be very beneficial as it will improve the supply chain, bring in more efficiencies. The inflow of dollars will also help the currency. More than that the perception on INdia will substantially improve, which had taken a beating in the recent past. I hope this is the beginning of more reforms.”

Taina Erajuuri, fund manager, FIM Asset Management, Helsinki
“This is a great news. I have been waiting for a long time and I had almost given up. Foreign investors were getting fed up with India because nothing was happening there. People would now feel more comfortable to see at least some of the reforms measures going through.”

Samiran Chakraborty, regional economist, Standard Chartered Bank
“These measures were pending for a long time and the government has now shown political courage to push things through. The process of clearing all these got delayed and it is just that all are coming together. As an immediate impact, business and consumer sentiment will improve, stock market will improve. But I don’t think RBI will cut rates after these measures because the impact of these steps on supply side will only be in the medium term. The government’s intention is to pacify rating agencies or convince them that government is taking the right steps. This should buy some time and rating agencies may wait for the final fiscal deficit number before deciding on India’s rating.”

Praveen Khandelwal, general secretary, Confederation of All India Traders
“It is unfortunate that despite opposition from their own allies they have chosen to again reopen foreign investment into the sector. It is surprising the government has again reopened the sector without announcing any solid measures to protect small traders. We will oppose this move even more strongly this time and are hopeful the government will roll back its decision just the way they did last time.”

Sharan Lillaney, aviation analyst, Angel Broking

“FDI in aviation has always been approved, this is just an approval for foreign airlines. This was not something out of the extraordinary, so there is no question of it being reversed.”

“I don’t think there will be a flurry of investments, but airlines in better shape will definitely see interest from foreign airlines, such as SpiceJet, Indigo or Jet.”

“There are a lot of people interested.”

Harish Agarwal, bond dealer, First Rand Bank

“The bond market is unlikely to react much ahead of the policy. The reform moves may prevent the rating downgrade or delay that for the next 3-6 months. The market will await the second half borrowing calendar to see how much the fiscal slippage is.

“Personally, I still do not expect a rate cut on Monday but (expect) a 100 basis point cut in statutory liquidity ratio.”

Subramanian Sharma, director, Greenback Forex

“All the negativities on the rupee have been factored in. The diesel price hike will help address the fiscal deficit. All the negativities created will change by all this reform action.

“The rupee should breach 54 to a dollar on Monday and I expect a 2-3 percent gain in the rupee from current levels. The rupee should move towards 53.20-53.50 to a dollar in near term.”

Siddhartha Sanyal, Chief India Economist, Barclays Capital

“This is not a coincidence but looks like a gameplan to meet some possibly internally set deadline as the government might want to go back to the rating agencies and try to convince them with these measures. The reason for the timing also could be because the political cycle is coming to a close in a few weeks time with Gujarat elections in November.”

“The positive impact could be on stocks which should have a positive kickback impact on disinvestment and, therefore, fiscal consolidation. In a situation like this, improved sentiment will have a broad impact. I don’t think the market will behave very negatively even if there is a marginal roll back because market will focus on the positive actions.”

Rajan Bharti Mittal, VC and MD, Bharti Enterprises

“This is a landmark decision in India’s economic reforms process. Development of organised retail in India will bring immense benefits to stakeholders across the value chain – from farmers to small manufacturers and above all to consumers. Enhanced investment in the sector can further the cause of employment, particularly amongst youth. In addition, this decision will open the doors for much needed technology and investments to develop the entire retail ecosystem in the country.

“Bharti Walmart’s Cash & Carry venture is already sourcing fresh produce directly from thousands of farmers as well as other merchandise from local manufacturers, thereby adding to the local economy’s growth and delivering immense value benefit to its customers such as kirana stores and other institutions.”

Abheek Barua, chief economist, HDFC Bank

“If you are looking for … a direct trigger factor that has led to all this being bunched together and pushed through in a bit of a rush, I would think that it’s pressure from the rating agencies.”

“If this sustains, and it’s not sort of rolled back on Monday or something, it certainly does the trick (to stave off a rating downgrade).”

Pinakiranjan Mishra, partner retail, Ernst and Young

“This time the way the government decided to implement the decision to allow foreign players is smart. Now there is no pressure on states who do not want to implement it.

“This should calm the opposing allies and the opposition parties.”

“When Value Added Tax was introduced, states had the option to choose whether they wanted to implement it in their states and eventually everybody opted for it when they looked at its benefits. FDI in retail should be a similar case.”

Andrew Holland, CEO Infestment Advisory, AMBIT CAPITAL

“Is it (the spate of reforms) a game-changer? Yes, it would be if it goes through. We’ve still got to hear what the opposition and the allies have to say about this.”

Gaurav Kapur, Economist, Royal Bank of Scotland

“After yesterday’s move and the opening up of FDI, these are the steps you need to take, definitely something which is positive.”

“The policy stasis that you’ve seen for so long is basically now being tackled…basically they are moving in all the directions in which the new finance minister talked about.”

“Hopefully they will stick to it and not go back like they did in the case of retail earlier, so that’s what remains to be seen. Otherwise I think everything is in the right direction.”

Rajiv Anand, MD and CEO, Axis Mutual Fund

“This is something that we have been waiting for many years, but what is also interesting is the pragmatic approach that has been taken where rather than try and get 100 percent consensus across states, what they have indicated is FDI in retail is permitted as long as each state government has the flexibility to approve it. So some states might approve it today while others may wait for a while, so looks like there is no scope for a rollback like last time.”

“I think the total that has been looked at for disinvestment is about 15,000 crore rupees (150 billion rupees), I think the government will be able to raise that sort of money easily through a mix of foreign, domestic retail and institutional money.”

Srividhya Rajesh, fund manager, Sundaram BNP Paribas Asset Management

“These are the measures which were expected for a long time now. The moves will have long-term implications. If the conditionalities are not too harsh, the decisions would result in sharp jump in foreign fund inflows.

“It’s a big opportunity for the foreign firms because India is a growth market and they are mostly operating in mature markets. These moves show the government is working on all fronts to revive growth.”

SL Narayanan, group chief financial officer, Sun Group

“We welcome the move to allow FDI in aviation this and the other proposals announced today certainly send the right signals to the global investor community. We cannot comment on any possible equity issuances at this stage. Of course, the new rules make it easier for SpiceJet to access growth capital from a new class of strategic investors, which is a good development”

Paresh Parekh, tax partner, Ernst & Young

“A big welcome and one of boldest steps. Hope this will be reflective of new era of reforms and re-instil investor confidence in India. Possibly first time in FDI regime, Centre has left to each State to decide whether it wants to opt-in for FDI in multi brand retail for their respective States. Global retailers will now definitely get back to their drawing boards to explore India plans. Also, Indian retailers looking for expansion and fund raising, will look forward to studying the fine print.”

Ramesh Vaidyanathan, partner, Advaya Legal

“The impact of this decision is much more than mere availability of funds to the cash-strapped Indian airline companies. It will help bring international best practices to the Indian aviation sector, improve the safety and legal compliance aspects of the sector, improve corporate governance standards, with the foreign investors being represented at the board level and improve the quality of the workforce with the benefit of the best international training and leadership.”

Chandrajit Banerjee, Director General, CII

“Coming a day after the fuel price announcements, the decision of the Government to ease FDI norms in an array of sectors like multi brand retail, civil aviation, Power Trading Exchanges and Broadcasting is a tremendous boost not only to the sectors in question, but is a huge mood lifter. The despondency that had set in owing to absence of policy announcements would certainly be addressed to some extent. Global and domestic perceptions would also change and CII is hopeful that the rating agencies would take due note of these announcements as well.

“The move to increase FDI caps in in these sectorsm will help mobilise capital into these sectors, which the country needs and would also improve the current account deficit situation, which was becoming alarming. Purely, from a policy point of view as well, yesterday’s announcements followed by today’s are an indication that reforms are back.”

Vijay Mallya, chairman, Kingfisher Airlines

“We are very pleased that the government has decided to allow foreign Airlines to invest upto 49% in the equity of Indian scheduled airlines. This will open up a wide range of opportunities for both Indian carriers and foreign carriers who wish to participate in the strong growth potential for civil aviation in our Country. Kingfisher will now be able to re-engage with prospective airline investors in a more meaningful manner and move towards re-capitalization and ramp up of operations.”

Anand Mahindra, chairman, Mahindra & Mahindra said on Twitter that, “From a Famine of policy action,we’ve moved to a Feast.The Government’s got back its gumption! We cheer & urge that they stay the course.”

Koushik Chatterjee, group CEO, Tata Steel

“The initiatives announced today would provide opportunities for growth in the future if implemented well. Policy reforms and fiscal initiatives from the Government are critical for supporting monetary accommodation by the Reserve Bank.”

Via : Business Standar

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