Blog: Tesco, Wal-Mart forced to sit tight on India retail ruling

Michelle Russell | 17 August 2012

The likes of Tesco and Wal-Mart may have to wait until 2014 to take advantage of proposals to allow foreign players to take direct ownership in India's multi-brand retail sector.

Some reports have suggested a decision on the move is expected as soon as the second week in September.

However, speaking to just-food this week, Anil Talreja, a partner at Deloitte Haskins & Sells in Mumbai, said the industry may have to wait until after the country's elections in 2014. This would also depend on who is elected, of course.

Despite the optimism of India's commerce and industry minister, Anand Sharma, uncertainty has surrounded plans to allow foreign investment in India's retail sector for some time.

Under the government plans, announced in late November, foreign companies would be able to own 51% of multi-brand retail stores. The Indian government claims the reforms would create jobs and modernise the country's supply chain. As the ruling was made by the cabinet, it did not to go to a parliamentary vote.

However, late last year, a partner in the country's coalition government announced the reforms had been delayed in a bid to win more political support. Speculation over when the policy will be implemented has continued since.

Opponents claim that giving retailers such as Wal-Mart Stores, Tesco and Carrefour greater access to Indian's retail market would cripple local businesses.

Those opponents include Sudip Bandhopadhyay, leader of the Trinamool Congress, and Mamata Banerjee, chief minister of the state of West Bengal and leader of the All India Trinamool Congress party, the second-largest party in India's ruling coalition.

Tesco, naturally, believes more overseas investment would only serve to benefit India's retail sector. The retail giant told just-food last year that the Indian government's decision to put its plans on hold would be to the detriment of consumers.

For now, franchise deals are one way for multinational retailers to grab a slice of India's fast-growing retail sector.

French retailer Auchan this week planted its flag in India through a franchise deal with Dubai-based Landmark Group, Spar International's former partner in India.
The investment rules, which also allow multinational retailers to help run cash-and-carries in the country, has allowed the likes of Wal-Mart Stores, Carrefour and Metro Group to enter India this way.

As the industry awaits news on the reform, defence minister A K Antony will this weekend travel to Kolkata in a bid to get West Bengal chief minister Mamata Banerjee on-board, local reports claim.

This is an issue that could run and run.



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