INDIA will open its retail market to global supermarket chains. The cabinet agreed to 51 per cent foreign ownership of multi-brand retail stores like Wal-Mart and Tesco and 100 per cent of single-brand retailers like Nokia and Reebok. Until now, these companies could only sell wholesale in India, not directly to customers.
The decision is of monumental consequences for India, where the retail market, one of the fastest growing in the world, is estimated to be around US$ 450 billion.
However, it has also generated protests by small businesses, opposition parties and some allies of the ruling Congress-led coalition government.
The Associated Chambers of Commerce and Industry in India expects liberalisation in the country’s retail sector to be worth US$ 1.3 trillion by 2018.
Supporters of the move say that allowing foreigners to control 51 per cent of multi-brand stores will bring in capital and breathe new life into the country’s economy at a time of high inflation and a weak rupee. However, the final draft proposal might be delayed or changed.
For the main opposition (ultranationalist) Bharatiya Janata Party (BJP), the move is “a tool to kill the domestic retail industry”.
Opponents say the multi-nationals will squeeze out India’s smaller and poorer traders and drive down prices paid to India’s farmers.
One cabinet ally of the ruling Congress party, Dinesh Trivedi of the Trinamool Congress, said his party was “completely opposed to it”.
With this reform, Prime Minister Manmohan Singh‘s embattled government appears to be slowly shaking off a string of corruption scandals.
Yet, the decision is a major political gamble. Small businesses and their employees could lose income and jobs.
This might fuel anger against the Congress party, unable to reconcile the interests of part of its electoral base and investors, and have an impact on the 2014 parliamentary elections. Asia News
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