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Pantaloon Retail, India’s largest retailer, said today (7 July) that government plans to up spending in the country’s rural areas should spark the sector into expanding outside big cities.

Finance Minister Pranab Mukherjee yesterday unveiled a set of packages designed to stimulate the country’s economy and help modernise the vast swathes of rural India.

A spokesman for Pantaloon, which runs the Big Bazaar supermarket chain in urban areas and the “semi urban / rural format” Aadhaar, argued the budget was “a clear signal” that the government’s focus will be “on where most of India lives”.

The Pantaloon spokesman said that, under Mukherjee’s plans, government spending will rise by 37%, or an extra US$37bn.

“By increasing the government outlay by such large amounts, the Finance Minister is creating new markets,” the Pantaloon spokesman told just-food. 

“It is for us to now to get out of our comfort zones and start catering in places where [the] majority of Indians live. Rather than limiting ourselves to the big metros, we have to look at new ways in which we can evolve new distribution strategies, offer value added products and drive consumption in rural India.”

Mukherjee’s budget, which includes a series of infrastructure projects, is set to increase India’s budget deficit as the recently-elected government looks to spur economic growth, which slowed to 6.7% in 2008/09.

India’s Finance Minister said the budget was designed to “deepen and broaden the agenda for inclusive development”.

“The … government has gone for a paradigm shift for making the development process more inclusive,” Mukherjee said. He said that the government wanted “to ensure that no individual, community or region is denied the opportunity to participate in and benefit from the development process”.

The Pantaloon spokesman said the budget had the “potential to bring about a paradigm shift in the Indian economy”.

He added: “After many years, if not decades, the philosophy for driving growth is bottom-up, rather than depending on the ‘trickle-down effect’. We are focusing on moving with the majority, rather than focusing on the affluent minority. Thus this budget is a clear shift in terms of its ambitious vision for driving economic growth.”

The spokesman admitted, however, that Pantaloon believes the budget lacks “fresh thoughts” on how the extra government spending can reach rural consumers.

“With such a huge expenditure plan to manage, it will be critical for the government to ensure the spending is efficient and the money reaches the pockets of those who it intends to,” the spokesman said. “While it can only be presumed that the Finance Minister is aware of this challenge, the budget fails to bring in fresh thoughts on how this can be achieved.”

Last month, Pantaloon revealed it was in talks with “multiple investors” over plans to raise up to INR40bn (US$828.5m) in the next two years to fund expansion.

The retailer’s expansion plans in the next year are set to focus on its Big Bazaar hypermarkets and its Food Bazaar supermarket chain, although the spokesman said plans to expand its Aadhar business “are still being finalised”.