India may open supermarket sector to FDI

NEW DELHI, Nov. 25 (UPI) -- The Indian government, in a major liberalization, approved foreign direct investment of as much as 51 percent in its $450 billion supermarket sector.

The approval of the proposal late Thursday by the coalition government of Prime Minister Manmohan Singh comes despite political risks, the Economic Times reported. The proposal would be debated in Parliament.

It would allow the entry of global retail giants such as Walmart into one of the world's largest markets.

The decision could create joint venture opportunities for domestic players, the Economic Times said.

"FDI in multi-brand retail (the supermarket sector) would benefit capital-constrained retailers such as Pantaloon Retail," the report quoted Wall Street bank J.P. Morgan as saying in a Friday research note, adding it would speed up the pace of investment in the supply chain to meet demands of increasing scale and bringing in the expertise of foreign retailers.

The proposal has drawn much debate in India even as the government faces stubbornly high inflation and slipping economic growth. Opponents maintain the influx of foreign giants would drive out millions of mom-and-pop stores in the country and put millions more people out of work.

Two major partners in the Congress-party led coalition have expressed opposition to the move, but it was largely welcomed by the industry, the Times said.

The Wall Street Journal said the decision would help open one of the last untapped great consumer markets in the world's largest democracy. Foreign retailers are only allowed to set up wholesale joint ventures, but could open supermarkets with their Indian partners under the plan.

The report said the government also relaxed rules for single-brand retailers such as Nike to own 100 percent of their Indian ventures businesses -- up from the current limit of 51 percent.