India is once again planning to open their doors to foreign investment in their retail industry, following a failed attempt to do so last year.
At the time, in December, the notion caused political unrest, leaving the plans to be pushed to the side. However, continued pressure to be proactive in regards to the country’s wider economy looks to have been enough to sway the decision back towards letting foreign investment into the country.
The $450 million retail sector in India will now be accessible to the world’s elite, but it is yet to be confirmed whether the likes of Walmart, Carrefour or Tesco will take advantage of the new regulations. The government will allow foreign businesses to own 51 percent of supermarkets to boost capital flows into the country as well as stabilising the struggling currency.
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The cabinet has already sanctioned the regulations, realising that a push into the retail economy would be more accepted among fellow politicians than a focus on diesel or kerosene inflation.
The market is certainly appealing too. India is the second largest producer of fruits and vegetables in the world, but a lot of the produced harvest is left to waste at present. A vast increase in retail chains would cater for this misusage and, in theory, raise the economy as a consequence.
Although the government has now stuck to its guns in pushing through the legislation, they have made it clear that it is not central government enforcement, and that it will be down to the local states to decide whether they implement the allowance of foreign investment. This may be an off-putting caveat to any potential retail firms, but if the states do see fit to take advantage of the change, then it is hoped that the positive results will cause a snowball effect in others following suit.
Rajeev Malik, Senior Economist at CLSA Singapore remains skeptical though: “I do think some things will happen. But will much of it happen? That remains to be seen. The government is not going to become a born-again government.”