Blog: Dean BestPerils as well as promise in India

Dean Best | 1 October 2007

Another day, another problem for ambitious Indian retailer Reliance Retail.

The company is facing a number of obstacles in its bid to expand its fledgling retail business across India, plans that have met with opposition from small shop keepers fearful of a large competitor growing across the country.

India’s largest private company Reliance Industries, wants to spend US$6bn on its retail business over the next four years, plans that, the company hopes, will see it run 5,000 stores in India.

Reliance has already seen stores closed in Uttar Pradesh, India’s most populous state, after the local government seemingly sided with protests from “mom and pop” store owners, angry at Reliance’s plans.

Today (1 October), a source close to Reliance told me that the company had shelved plans to open its Reliance Fresh convenience stores in West Bengal, a state run by a leftist coalition.

The growth of the retail market and the burgeoning affluence of India’s middle class is fuelling Reliance’s ambitions and encouraging multinationals like Wal-Mart and Metro to step up their efforts in the country. Direct foreign investment into India’s retail sector is banned by the Indian government but the likes of Wal-Mart and Metro have invested into the country’s cash-and-carry sector, moves that many see as laying foundations for future investment should the market be liberalised.

However, the pace of India’s economic growth is also fuelling resentment among the millions of poor who feel disenfranchised amid growing economic disparity and there have been signs of a backlash against the country’s economic boom – as the protests against Reliance suggest. In recent weeks, there have been riots and even the Taj Mahal was forced to close.

FMCG companies often speak of India’s potential but there must be an awareness that such fast economic growth has its perils as well as its promise – and businesses can be caught in the crossfire.


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