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India to open up its vast retail sector

To global supermarket chains such as Wal-Mart, Tesco:

India: India prepared Friday to announce details on how the nation’s vast retail sector would be opened to global supermarket chains, after the cabinet backed the long-awaited reforms.

Commerce Minister Anand Sharma was expected to make a statement in parliament to outline legislation changes that look likely to push India further towards becoming a modern consumer society.

At a late-night meeting Thursday, the cabinet cleared a proposal opening up the sector worth an estimated $470 billion to allow international firms such as Wal-Mart and Tesco to hold a 51-percent stake in multi-brand retailers.

It also raised the foreign investment cap to 100 percent from 51 percent for single-brand retail operations such as Gucci, Nokia and Reebok. “This has been a long time coming, and will be welcomed by big foreign and domestic retailers,” said analyst Arvind Singhal, head of consultancy Technopak Advisors.

“The economy still looks forward to significant future growth, but the challenges of real estate plots and poor supply chains will need to be tackled.”

Singhal said he expected Indian shopping habits to focus on home delivery, rather than the drive-and-shop supermarket model seen in Europe and elsewhere in recent decades.

“Internet ordering and home delivery is becoming more popular globally and India is likely to go in that direction due to bad traffic and with people increasingly short of time,” he said.

“Any change will be slow and steady, not in 12 months but in three to five years as the opportunities become clear,” he said.

Among the conditions reported to be imposed are a minimum investment and a rule that foreign firms must source a certain amount of their products from local firms.

The Congress-led government has been seeking to fend off charges of “policy paralysis” after being engulfed in a string of corruption scandals.

Its decision on Thursday was seen as a sign of its intention to press ahead with a reformist agenda despite strong political opposition.

Foreign multinationals have lobbied for years to sell directly to consumers in the world’s second most populous nation.

Multi-brand foreign groups such as US-based Wal-Mart currently operate as wholesalers in India but are prevented from selling directly to the public. The vast majority of consumers currently shop at small local markets.

Raj Jain, chief executive of Wal-Mart’s Indian arm, said the government’s move contributed toward India’s image as a “welcoming destination for international businesses.”

But he added the company needed to study “the finer details of the new policy” before commenting further.

Critics have worried that modern, large-format stores will drive small family-owned shops out of business, despite assurances from industry figures that the market is big enough to embrace all players. AFP

 

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