India opens up to global retailers
Source: Agencies |
November 26, 2011, Saturday
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Print Edition
Print Edition
GLOBAL supermarket chains yesterday welcomed a long-awaited invitation from India to invest in the country's US$450 billion retail market, but they fear the policy's small print may keep a lid on investment in the short term.
The Indian government approved 51 percent foreign direct investment in supermarkets late Thursday, paving the way for firms such as Wal-Mart Stores Inc, Tesco and Carrefour to enter one of the world's largest untapped markets.
The move may breathe new life into the government of Prime Minister Manmohan Singh, who ushered in free market reforms 20 years ago, but has been bogged down by corruption scandals.
As well as appealing to India's burgeoning urban middle class, the reform will draw in much-needed new investment to a sputtering economy. Policymakers said spending on cold-storage and warehousing will ease supply side pressures that have driven inflation close to a double-digit clip.
"It's important not only for raising overall growth, but also for containing inflation and improving the quality of life for over 50 percent of the population," said central bank Governor Duvvuri Subbarao.
But the move also carries risk for Singh, whose party must contest five state elections next year. It is opposed by millions of small shop owners who fear for their livelihoods. A group representing small traders said it was planning protests for next week.
To appease its opponents, the government insisted foreign retailers source almost a third of their produce from small industries, invest a minimum of US$100 million in India and spend half of that on "back end" infrastructure.
An official at one major international retailer said the company was concerned about the numbers the government had mentioned. "Some of the conditions look quite stringent," he said.
The stores will only be permitted in cities of more than 1 million people, and individual states will decide whether to allow the global giants on to their patch, Industry Secretary PK Chaudhry said.
The head of Wal-Mart's local cash-and-carry joint venture praised the move, but also struck a note of caution.
"We will need to study the conditions and the finer details of the new policy and the impact that it will have on our ability to do business in India," said Raj Jain, CEO of Bharti Wal-Mart.
The Indian government approved 51 percent foreign direct investment in supermarkets late Thursday, paving the way for firms such as Wal-Mart Stores Inc, Tesco and Carrefour to enter one of the world's largest untapped markets.
The move may breathe new life into the government of Prime Minister Manmohan Singh, who ushered in free market reforms 20 years ago, but has been bogged down by corruption scandals.
As well as appealing to India's burgeoning urban middle class, the reform will draw in much-needed new investment to a sputtering economy. Policymakers said spending on cold-storage and warehousing will ease supply side pressures that have driven inflation close to a double-digit clip.
"It's important not only for raising overall growth, but also for containing inflation and improving the quality of life for over 50 percent of the population," said central bank Governor Duvvuri Subbarao.
But the move also carries risk for Singh, whose party must contest five state elections next year. It is opposed by millions of small shop owners who fear for their livelihoods. A group representing small traders said it was planning protests for next week.
To appease its opponents, the government insisted foreign retailers source almost a third of their produce from small industries, invest a minimum of US$100 million in India and spend half of that on "back end" infrastructure.
An official at one major international retailer said the company was concerned about the numbers the government had mentioned. "Some of the conditions look quite stringent," he said.
The stores will only be permitted in cities of more than 1 million people, and individual states will decide whether to allow the global giants on to their patch, Industry Secretary PK Chaudhry said.
The head of Wal-Mart's local cash-and-carry joint venture praised the move, but also struck a note of caution.
"We will need to study the conditions and the finer details of the new policy and the impact that it will have on our ability to do business in India," said Raj Jain, CEO of Bharti Wal-Mart.
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