India has come a step closer to opening up multi-brand retail to overseas operators after a key government committee approved an easing of rules on foreign investment.
A committe of secretaries agreed in principle to allow non-Indian retailers to own up to 51% of a multi-brand retailer.
The approval will not immediately open the doors to global retailers like Wal-Mart Stores, Carrefour and Tesco. Any plan to relax restrictions still requires the approval of India’s Commerce Ministry and then the country’s Cabinet, according to Indian business website CNBC-TV18.
At present, India allows foreign companies to own 51% of retail stores selling one brand like MARKS AND SPENCER. The country also allows multinationals full ownership of wholesale stores, which is how the likes of Wal-Mart, Tesco and Metro Group have entered the market.
India has been debating whether to allow more foreign investment in the country’s retail sector for a number of years, with the Finance Ministry releasing a report in 2009 arguing that rules should be eased.
Earlier this year, an Indian government panel also recommended relaxing the rules as part of attempts to battle high levels of inflation and to cut the margin between farmgate and retail prices.
A number of foreign retailers are already present in India, with Wal-Mart operating cash-and-carry outlets in partnership with Bharti Retail. Metro operates six wholesale stores and Tesco signed an agreement with Tata in 2008 to operate cash-and-carry outlets in the country.
Shares in the country’s largest operator Pantaloon rose 1.82% on the news to INR338.2 a share, its highest price for the past six months. Meanwhile shares in Shopper’s Stop were up 7.9% to a high of INR504.85 in today’s trading.