The Indian retail market is estimated to be worth $250bnForeign retailers will be able to own their own stores in India for the first time as part of a major government liberalisation of business. Until now, foreign businesses have only been allowed to operate franchises for fear they would harm indigenous firms.
But new regulations will allow foreign retailers to own 51% of outlets as long as they only sell single-brand goods. The competition drive, also affecting mining, energy and transport, has been opposed by the Communist Party.
Job creation:
Nevertheless, the Indian government is determined to press ahead with the reforms which it says will create jobs, while giving sufficient protection to Indian businesses.
This is aimed at attracting investment, technology and best global practices
Kamal Nath, Indian trade minister. Experts believe that retailers such as Nike, Reebok and Marks & Spencer could take advantage of the changes to step up their investment in India, the world’s eighth largest retail market.
Trade minister Kamal Nath said the reforms were the first changes to laws governing foreign investment in 15 years.
“This is aimed at attracting investment, technology and best global practices and catering to the demand of branded goods in India,” he said.
Under the new regime, only firms selling single-brand products will be able to directly operate their own stores. This could prevent supermarket giants such as Wal-Mart and Tesco which sell an array of goods from extending their presence in India.
Concerns:
The Communist Party, a coalition partner in the Congress Party-led government, said the changes could threaten thousands of small retail concerns.
“We have been opposing it,” said D. Raja, the Party’s secretary, who warned that the changes would eventually lead to full liberalization.
“I do not know why the government has to take such a decision.”
Increased foreign investment will also be permitted in other sectors of the economy including diamond and coal mining, power trading, rubber processing and pipeline manufacturing.
Foreign firms will also to play a greater role in building of new airports, supporting the rapid development of the country’s aviation industry.
