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December 8, 2011

INDIA: FDI will benefit retail sector – Tesco CFO

More overseas investment would benefit India's retail sector, Tesco CFO Laurie McIlwee insisted today (8 December).

By Dean Best

More overseas investment would benefit India’s retail sector, Tesco CFO Laurie McIlwee insisted today (8 December).

McIlwee said the Indian government’s decision to put its plans to ease restrictions on foreign ownership in the country’s retail industry on hold would be to the detriment of consumers.

“It’s probably a missed opportunity for customers, given the challenges of retail and supply chain in India. There’s a lot of know-how around the world about how to run multi-brand retail and the likes of ourselves, Carrefour and Wal-Mart have got something to offer,” McIlwee told just-food.

Yesterday, India’s ruling Congress Party confirmed that plans to reform the country’s retail sector had been suspended amid fierce opposition from some local politicians and retailers.

Finance Minister Pranab Mukherjee said a plan to allow overseas investors to own 51% of multi-brand retail outlets would not be implemented until “a consensus is developed through consultation among various stakeholders”.

The Indian government claimed the reforms would create jobs and modernise the country’s supply chain. Opponents, however, claimed allowing the likes of Wal-Mart Stores, Carrefour and Tesco greater access to India’s retail market would put local retailers out of business.

McIlwee indicated that there would have been little change to Tesco’s strategy in India even if the reforms were pushed through. Tesco runs cash-and-carry outlets with its local partner Tata Group, the Indian conglomerate. The UK retailer also operates Tata’s Star Bazaar multi-brand stores for the Indian company on a franchise basis.

“Frankly there probably wouldn’t have been much of a difference in terms of our strategy in India with or without FDI,” McIlwee said. “There are multi-brand outlets that Tesco runs – Star Bazaar. We’re the franchisee that runs those stores. There would have been more of those.”

The Tesco finance chief said it was “impossible to tell” whether the reforms would go through. “This initiative has come forward so many times and has got very close to the line and not crossed it and even now crossed the line and gone back across it. We’re just focusing on running our business in India as it is.”

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