LEAD: India to allow global retail giants to set up shop

Nov 24, 2011, 16:27 GMT

New Delhi - India on Thursday decided to allow 51-per-cent foreign direct investment in the multi-brand retail sector, a move that would allow global chains like Wal-Mart Stores Inc and Tesco Plc to enter the market.

India already allows 100-per-cent foreign investment in the cash-and-carry sector and 51 per cent in single-brand retail, but has so far refrained from opening up the multi-brand sector.

The cabinet also took a decision to allow 100 per cent investment in the single-brand retail sector, government sources said.

Details of the decision were not available. 'We will make a statement in parliament tomorrow,' Commerce Minister Anand Sharma said.

Several Indian opposition political parties as well as members of the Indian National Congress party-led governing alliance have opposed the move saying it would have an adverse impact on the mom-and-pop shops, or small retailers, which dominate the estimated 590-billion-dollar retail sector.

The foreign investment would be allowed with conditions like a minimum investment of 100 million dollars, the Indian Express newspaper reported, citing a Commerce Ministry note prepared for the cabinet.

A certain percentage of local sourcing, at least 50 per cent of the investment going into developing back-end infrastructure, and restriction of outlets to cities with a population of over 1 million, would also be conditions, the newspaper reported.

According to the 2011 census, India has 53 cities with a population of over 1 million.

The widely leaked note said foreign investment would help to upgrade post-harvest storage facilities and bring in technology and management know-how to remove inefficiencies in the supply chain.

It would help tackle inflation, attract funds to expand the retail sector and also benefit consumers in terms of cost and quality, the note said.

India's leading opposition parties said they would protest against the decision.

'Small retailers' businesses will finish, only big retailers will remain. It will create huge unemployment. We will carry out a massive agitation across the country,' Bharatiya Janata Party leader and former finance minister Yashwant Sinha said.

'Instead of looking at ways to increase the country's wealth, this government wants to increase the wealth of foreign enterprises,' Sitaram Yechuri of the Communist Party of India-Marxist said.

The move was, however, welcomed by business leaders.

'This would open up enormous opportunities in India for expansion of organized retail and allow substantial investment in back-end infrastructure like cold chains, warehousing, logistics and expansion of contract farming,' IANS news agency quoted B. Muthuraman, president of the Confederation of Indian Industry as saying.