Click to play videoNew Delhi: The Manmohan Singh government has bitten the bullet, opening up India's retail sector to foreign investment. It is a bold policy move and a game changer for the retail market.
Brands such as Wal-Mart, Tesco and Carrefour can now enter and tap the nearly 600 billion-dollar Indian retail market. The government has opened up the retail sector, allowing 51 per cent foreign investment in multi-brand retail and 100 per cent FDI in single-brand retail.
Currently, family-run neighbourhood stores account for 90 per cent of the sector.
In 1997, the Deve Gowda-led United Front government had allowed 100 per cent foreign investment in the wholesale trade. It was the first step towards modernising the retail business.
In January 2006, up to 51 per cent foreign investment was allowed in single-brand retailing. Multi-brand retailing was the next logical step, as more competition would mean better prices and quality for the consumer.
Companies have to invest a minimum $100 million, at least half of which must go towards creating back-end infrastructure like cold chains and warehouse storage.
At least 30 per cent of the procurement will be from small and medium enterprises.
Those opposing the move claim it will wipe out the unorganised retail business, which is India's second largest employer after agriculture. However, these retail chains are restricted to cities with over 10 lakh population, which is about 53 cities.
The hike in single-brand retail could see the entry of companies like Ikea and luxury brands like Louis Vuitton who can now open exclusive stores in India.
Opening up the retail sector is one of the boldest moves to come from the Manmohan Singh government, hopefully signalling an end to policy paralysis at a time the economy is slowing down.
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