Reliance Retail has insisted its plans for expansion in India remain intact despite the closure of its stores in the country’s largest state on “law and order” grounds.
Reliance, which plans to invest US$6bn on expansion over the next four years, has been forced to close its outlets in the state of Uttar Pradesh following an order from the local state government.
Authorities in the state capital of Lucknow have ordered Reliance to close ten stores because of security concerns.
A source familiar with the situation told just-food that Reliance has put its plans for expansion in Uttar Pradesh – India’s most populous state – on hold. The state government is expected to take up to 60 days to make a formal ruling on the situation.
The source said there has been “some protests” among small Indian shopkeepers who fear that they could lose their businesses if larger retail groups like Reliance expand throughout the country.
Reliance, which runs 250 convenience stores, one hypermarket and one “speciality store”, wants to expand its store network to around 5,000 outlets across India by 2011.
The source said Reliance is still confident about its plans for expansion adding that the company believes it is only “a matter of time” before open more stores in Uttar Pradesh.
“The central government has asked the state for the reasons why it asked Reliance to close down,” the source said today (28 August). “There have been some protests but nothing major or significant. After a few days, the protests fizzle out because (smaller shopkeepers) realise Reliance is not going to take over 100% of the sector.”
India’s retail market is estimated at around US$350bn, a figure set to grow and which has caught the attention of multinational retailers like US giant Wal-Mart.
Earlier this month, Wal-Mart announced a deal to set up a network of cash-and-carry stores with local conglomerate Bharti Enterprises. However, direct foreign investment in India’s retail sector has, so far, been prohibited by the Indian government.
Netherlands-based retail group Spar International has also re-entered the Indian market with a licensing deal with local retailer Max Hypermarkets.