India Allows Foreign Investment in Retail
By Bibhudatta Pradhan and Malavika Sharma - Nov 25, 2011
India approved allowing overseas companies to own as much as 51 percent of retailers selling more than one brand, paving the way for global companies such as Wal-Mart Stores Inc. (WMT) and Tesco (TSCO) Plc to own stores.
Overseas companies must invest at least $100 million, half of which has to be spent on developing backend infrastructure, Commerce Minister Anand Sharma said in a statement presented to parliament today. India’s cabinet yesterday decided to ease ownership rules, including permitting 100 percent foreign holding in companies selling a single brand.
India’s decision to allow overseas ownership in retail will create up to 10 million jobs and give farmers better prices, Sharma said. Wal-Mart, Carrefour SA (CA) and Tesco seek to step up their presence in the world’s second-most populous nation to tap a market estimated by Business Monitor International to double to $785 billion by 2015 from $396 billion this year.
“We perceive this as a huge positive for the Indian retail sector,” Shankar. K, an analyst with Edelweiss Financial Services Ltd. said in a note to clients today. “It will stimulate investments especially in logistics and cold chain development.”
Overseas retailers will be required to purchase at least 30 percent of goods sold in the ventures from small industries, Sharma said. Stores will be permitted only in 53 cities with a population of 1 million or more, he said. The government will retain the first right to buy farm products, the minister said.
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