Major retailers like Wal-Mart, Tesco and Carrefour will now be able to invest in Indian retail - albeit with a number of conditions

Major retailers like Wal-Mart, Tesco and Carrefour will now be able to invest in Indian retail - albeit with a number of conditions

An executive decision by India's cabinet to ease laws on foreign direct investment (FDI) in the country's retail market was met with opposition from large sections of the parliament.

Under the decision, announced yesterday (24 November), foreign companies can now own 51% of multi-brand retail stores. Previously, major retailers like Wal-Mart Stores, Tesco and Metro could only sell wholesale in India.

However, opposition groups, and even some key government allies, were furious at the decision, claiming it will force smaller retailers out of business and hit prices paid to farmers. As the ruling was made by the cabinet, it did not to go to a parliamentary vote.

In a press conference yesterday, commerce minister Anand Sharma said 10m jobs will be created over the next three years and prices will be reduced as a result of the reforms.

The legislation contained a number of conditions for foreign retailers that invest in India. They must invest at least US$100m, half of which must be spent on infrastructure. Companies will also be forced to buy 30% of produce from small and medium enterprises and are only able to establish stores in cities with a population of one million people or more.

As India is a federal country, individual states will have to give their consent to allow foreign companies to open stores, which may prove a problem for states controlled by parties opposing FDI.