India threw open
its $450 billion retail market to global supermarket giants on
Thursday, approving its biggest reform in years that may boost sorely
needed investment in Asia's third-largest economy.
Trade Minister Anand Sharma said on Friday that the government's
new policy to allow foreign supermarkets into the country would create
10 million jobs over three years, while not affecting smaller, domestic retailers.
The world's largest retail group, Wal-Mart Stores Inc, and its rivals
see India's retail sector as one of the last frontier markets, where a
burgeoning middle-class still shops at local, family-owned merchants.
Allowing foreign retailers to take stakes of up to 51 percent in
supermarkets would attract much needed capital from abroad and
ultimately help unclog supply bottlenecks that have kept inflation
stubbornly close to a double-digit clip.
Wal-Mart
hailed the decision, but said it would take a close look at the fine
print to see what the decision entails for its ability to do business in
India.
"We believe this is an important first step," said Scott Price, president and chief executive of Walmart Asia in a statement.
Raj Jain, who heads Wal-Mart India, told CNBC TV18 the decision will
"redefine the way consumers shop in India, but more importantly, the way
supply chains in India run."
Under fire for a slow pace of reform, Prime Minister Manmohan Singh's
embattled government appears to be slowly shaking off a string of
corruption scandals to focus on policy changes long desired by
investors.
"This is a very bold move and the economic reforms
process is back on track." Rajan Mittal, vice chairman of India's Bharti
Enterprises, which is Wal-Mart's partner in that market, told
reporters.
Millions of small retail traders vigorously oppose
competing with foreign giants, potentially providing a lightning rod for
criticism of the ruling Congress party ahead of crucial state elections
next year.
Food Minister K.V. Thomas said the government will allow foreign direct investment of up to 51 percent in multi-brand retail
- as supermarkets are known in India. It will also raise the cap on
foreign investment in single-brand retailing to 100 percent from 51
percent, he added.
The new rules may commit supermarkets to
strict local sourcing requirements and minimum investment levels aimed
at protecting jobs, according to local media.
A heavyweight member of Singh's coalition government warned on Thursday it unequivocally opposed opening the sector.
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