India Seeks to Reassure Critics of New Retail Policy

Posted November 25th, 2011 at 11:50 am (UTC-5)
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Indian officials say opening up the country’s retail sector to foreign chians will not hurt smaller businesses, but instead create some 10 million jobs over three years.

India’s Commerce Minister Anand Sharma said Friday the government has built in safeguards to protect farmers and small shopkeepers while allowing foreign retailers like Wal-Mart and Tesco into the country.

Global companies will now be allowed to own up to 51 percent of multi-brand retail companies in India such as supermarkets. Foreign companies can also own up to 100 percent of single-brand retailers.

The new foreign superstores will be allowed to set up shop in cities with a population of at least one million. They must invest at least $100 million and half of this would have to be invested in rural infrastructure and refrigerated transport and storage. Thirty percent of their produce would also have to come from small and medium enterprises.

Global retail giants have waited for years for India to open its $ 450 billion domestic retail market, which is dominated by family-run stores.

Supporters of the retail policy say allowing large foreign companies into the retail sector could improve India’s food distribution system, which is lacking in adequate warehouses and storage facilities. Analysts say boosting the supply chain will help drive down India’s high inflation rate. Farmers will also get higher prices for their produce.

But critics of the reform, including the country’s main opposition Bharatiya Janata Party, say smaller retailers will be wiped out, leading to higher unemployment.

India’s retail sector is the second biggest employer after agriculture.