Blog: Uncertainty remains over Indian FDI

Sam Webb | 11 January 2012

The future of troubled proposals for supermarket companies to enter India is still uncertain, despite today's (11 January) government announcement that it will allow foreign brands to own single-brand stores.

The proposals to allow foreign direct investment in the country, announced in November, was a bid by Prime Minister Manmohan Singh's Congress party to modernise the Indian retail market, attract investment and create jobs. Under the plans, foreign companies would be able to own 51% of multi-brand retail stores and 100% of single brand product retail (for example, Ikea). Currently they must partner with Indian retailers.

Few could have foreseen the outrage it provoked among Indian opposition MPs, and even key government allies. They began a series of protests that caused parliamentary proceedings to grind to a halt. They claimed giving retailers like Wal-Mart Stores, Tesco and Carrefour greater access to Indian's retail market would crush local businesses underfoot. One MP even threatened to personally torch any Wal-Mart that dared to open.

The government suffered what many saw as a humiliating climbdown and suspended the plan to begin consultation with various bodies after the parliament was crippled for two weeks.

The Department of Industrial Policy and Promotion today announced the single brand reforms would go ahead, but remained noticeable silent on the divisive issue of supermarkets.

The likes of Wal-Mart, Tesco and Carrefour may take heart at today's announcement, but time will tell if the government has the backbone and political capital to force through the controversial FDI reform.

 


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