INDIA’S cabinet may decide by next week to allow chains such as the world’s largest retailer Wal-Mart Stores Inc to operate in the country with a majority stake under strict local sourcing rules, a senior government source told reporters.
A draft cabinet note suggesting so-called multi-brand retail foreign firms could hold up to 51 per cent ownership has already been reviewed, a senior government source said on Friday (November 18).
“We have already sent it to the cabinet for their approval,” the source said, adding that a decision could come next week.
Inadequate road, rail and storage facilities mean significant logistical hurdles and extra expense in moving farm and factory goods to Indian consumers, driving up prices nationwide.
Wholesale inflation in India has remained stubbornly high for more than a year and is now close to 10 per cent despite 13 interest rate rises by the Reserve Bank of India (RBI) since March last year.
Small shop owners that account for more than 90 per cent of India’s $450bn (£284.89bn) retail sector oppose the entry of foreign players, fearing that they will be put out of business.
India currently allows 51 per cent foreign investment in single-brand retailers and 100 per cent for wholesale operations, a policy that Wal-Mart and Carrefour among others have lobbied to change for years.
Another government source said the finance ministry had thrown its weight behind a second proposal to raise the cap on single-brand retail to 100 per cent from 51 percent.
The cabinet note also stipulated businesses would have to source at least 30 per cent of manufactured and processed goods from local small industries, the Business Standard newspaper reported on Saturday (November 19).
It also said the minimum amount a foreign retailer would have to invest was $100m (£63.30m), at least half of which would go to “back-end” logistics and storage infrastructure.
Those conditions are in line with those first agreed by a group of senior civil servants in July.
An executive of UK retail giant Tesco Plc told reporters on Monday (November 14) the company plans to build on its existing tie-up with India’s Tata Group to expand if foreign operators are allowed to invest in multi-brand retail.
