India Opens Door for Global Stores.

India's Cabinet has decided to allow more direct foreign investment in the nation's huge retail industry, a move that could strengthen the country's food supply chain and open India to giant global retailers such as Walmart.

The Cabinet approved 51 per cent foreign direct investment in multibrand retail and increased the cap in single-brand retail to 100 per cent despite resistance from both allies and opposition parties.

India at present allows 51 per cent foreign investment in single-brand retailers and 100 per cent for wholesale operations.

Top retailers such as Walmart, Carrefour, Tesco and Ikea have long lobbied to free the policy further.

Foreign multibrand retailers have Indian partners in wholesale operations now but have no retail presence in the country of 1.2 billion people.

The spokesman for the ruling Congress Party, Abhishek Manu Singhvi, called the decision "centrist and reasonable". He was speaking to NDTV news channel.

The main opposition, the rightwing Bharatiya Janata Party, decried the move.

"The Government has clearly bowed to international pressure," Chandan Mitra, a spokesman, told the same TV channel.

Ashish Sanyal, managing director of AMP Retail Services, said, "It's a good decision that will benefit everyone." He is a consultant who helps retailers enter India.

India's $540 billion retail market is the nation's second-largest employer, after agriculture, according to consulting firm Deloitte.

Advocates see the move as a way to strengthen India's almost absent food supply chain which is so beset by spoilage, poor infrastructure, hoarding and middlemen that the Government estimates some 30 per cent of produce rots in a nation with soaring food costs and tens of millions who go to bed hungry each night.

If companies such as Walmart and Tesco are allowed to open shops of their own, they may invest billions in improving farming techniques and getting produce into stores more efficiently, bringing down food inflation which has averaged 10.5 per cent over the last year and possibly improving rural incomes. The Ministry of Commerce says it will cost 76.9 billion rupees ($2 billion) to build the additional 35 million metric tonnes of food storage India needs.

In a July paper, it suggested that loosening restrictions on foreign investment in India's retail sector could be the best way to get more storage space built.

Yet the country has struggled to find consensus because of concerns about what it would mean to millions of small shopkeepers as well as the poor.

Sanyal said small businesses had nothing to fear.

"At the end of the day this is like the high tide. All boats will rise. We will learn from the big retailers."

Political deadlock on long-promised reforms such as this has helped cool foreign investor interest in India.

Policymakers are under acute pressure to find ways to attract foreign currency to help strengthen the rupee, which hit an all-time low against the dollar this week.

Traders say the central bank has been buying rupees in recent days but those measures are unlikely to reverse the currency's plunge without more far-sighted policy reform.

In July a government committee studying multi-brand retail had cleared the idea and suggested US$100 million as minimum investment for foreign companies.

Source : nzherald.co.nz