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April 7, 2014

INDIA: BJP plans to ban foreign supermarkets entering retail sector

Indian political party Bharatiya Janata Party (BJP), which is expected to lead the country's next government, has said it plans to ban foreign supermarkets from entering its retail sector.

Indian political party Bharatiya Janata Party (BJP), which is expected to lead the country’s next government, has said it plans to ban foreign supermarkets from entering its retail sector.

In its election manifesto, the party said: “Barring the multi-brand retail sector, FDI will be allowed in sectors wherever needed for job and asset creation, infrastructure and acquisition of niche technology and specialised expertise. BJP is committed to protecting the interest of small and medium retailers, SMEs and those employed by them.”

The move is likely to deal a blow to international supermarket players. 

Tesco became the first international retailer to take advantage of the easing of Indian restrictions on foreign direct investment in multi-brand retail. Foreign companies had been prohibited from investing in multi-brand retail outlets in India and overseas retailers sought wholesale and franchise deals. However, last year, India said it would allow international investors to own up to 51% of multi-brand outlets.

At the end of last year, Tesco struck a deal to own 50% of Trent Hypermarket Limited, a retail subsidiary of Indian conglomerate Tata Group, in a US$132m transaction.

Last month, Carrefour said it would look at exploiting the easing of regulations on foreign direct investment in India’s retail sector in a matter of months.

Speaking to just-food today, a spokesperson for Tesco said: “We note the comments from the BJP. We have no further comment to make at this stage.”

Carrefour said it “won’t comment on this issue”.

Wal-Mart runs the Best Price Modern Wholesale cash-and-carry chain after its venture with local conglomerate Bharti Enterprises came to an end last autumn by mutual agreement.

The end of the venture had been seen as the prelude to fresh expansion by Wal-Mart in India.

However, the US retail giant has put its expansion in the country on hold amid bribery allegations related to applications for new store openings.

Moreover, the company has yet to expand into consumer-facing retail after rules on foreign direct investment were relaxed in 2013. Wal-Mart is concerned the changes do not go far enough to enable the world’s largest retailer to operate effectively in the market. It did not respond to just-food’s email requests for comment on the BJP mainfesto.

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