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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