India's government has once again cleared a controversial plan to open up its lucrative retail sector to global supermarket chains.
Last year, the government suspended a similar plan after fierce opposition from its allies and political rivals.
International firms such as Walmart and Tesco will now be able to buy up to a 51% stake in multi-brand retailers.
Analysts say the government has reintroduced the measure in an effort to revive a flagging economy.
Prime Minister Manmohan Singh said: "I believe that these steps will help strengthen our growth process and generate employment in these difficult times."
The decision was one of several key reforms announced by the government. It also approved a plan to allow foreign airlines to buy 49% stakes in local carriers, in the hope that this will boost the country's troubled aviation sector.
It also follows Thursday's dramatic 14% rise in the price of diesel, which is heavily subsidised in India.
The government was forced to back down on retail reform after the cabinet first undertook to open up the retail sector last November.
The move had been strongly opposed by tens of thousands of small businesses and cornershops who fear they will be put out of business.
The opposition Bharatiya Janata Party and the Communists labelled it a "betrayal of democracy".
But this latest move has already been welcomed by economists who say it will transform the way Indians shop and will boost the economy.
Some business leaders also backed the plan.
Sunil Bharti Mittal, chief executive of conglomerate Bharti Enterprises, said: "The series of policy decisions announced by the government today signal that India is on the move.
"More importantly, they will boost sentiment within the domestic industry and provide much needed momentum to the economy."
Briefing reporters after the press conference, Trade Minister Anand Sharma said: "Views of all state governments were ascertained, some states received the proposal very well, some expressed reservations. We tried to build a consensus through an inclusive and democratic process."
Mr Sharma said the implementation of the policy had been left entirely to the states, suggesting that some opposed to reform could opt out.
Reports suggest that other conditions have also been imposed on groups wanting to invest in India.
For example, companies will have to invest at least $100m (£67m), open outlets only in towns with a population of more than one million and source at least 30% of produce from India, the AFP news agency reports.
Similar conditions were suggested when the government first attempted to introduce the plan last year.
Multinational retailers such as like Walmart, Carrefour and Tesco already have outlets in India, but they deal with smaller retailers. This decision allows these chains to sell directly to Indian consumers.
"Tesco welcomes this positive development but we await further detail on the conditions... we are hopeful that [it] will allow more Indian consumers, businesses and communities to benefit from world-class retail investment," said a statement by Tesco.
Wal-Mart said greater investment following the government's move would "lower the price of products, improve the livelihoods of farmers and ease supply-side inflation.
"Through these, and several other initiatives, we hope to make a positive impact on the lives of the people of India."
This is really a welcomed development for the people of India as well as the multinationals who have interests in opening up retail chains in the second most populous nation in the world. Although this economic reforms have been met with stiff resistance from some locals who fear they will be out of business once the big companies start coming in, yet in the long run they will realize the benefits of opening up to foreign multinationals in terms of quality products and service, low price, employment opportunities, community development and the likes. In the other hand this will increase the market size of the multinationals and in turn increase their sales during this period when the developed nations suffered from economic recession and consumer demands have dropped drastically.
ReplyDeleteThis move will definitely boast the economy of India which has been regarded as one of the emerging economies in the 21st century. The good news for the multinationals and the Indian populace is that the government is going on with this reforms in spite of the opposition.
I think it is possible for Kerry Group to invest in india; it could be a huge opportunity. If Kerry Group can supply the supermarket with their products in a way that people buy it, it will be a real success. But for that they need to adapt their products to the Indian population and persuade the supermarket to choose them, through very good marketing!
ReplyDeleteIn this article, the Indian government announces a new reform that authorize the opening of supermarkets in India.
ReplyDeleteThere is strong opposition against it, as thousands of small retailers who are fearing to lose their jobs.
However this time the government is serious, it would boost economic growth in India.
Currently some international retailers, like tesco, are already present in India but the haven't their own supermarket yet, they only deal with smaller retailers.
To my opinion, the India is a possible new market for Kerry Group, it could be a huge opportunity. If Kerry Group can supply the supermarket India it will be a real succed. But for that they need to adapt their products to the Indian population and convince the supermarket to choose them.