NEW DELHI: India on Friday gave the green light for foreign supermarket giants such as Walmart and Tesco to enter the country as part of a blitz of economic reforms announced by the government.
The foreign groups will be able to buy stakes of up to 51 per cent in multi-brand retailers, allowing them into a previously protected but potentially hugely lucrative sector, Commerce Minister Anand Sharma said.
The government also relaxed investment rules in the aviation sector allowing in foreign airlines for the first time and the cabinet approved the sale of stakes in four state-owned companies in the oil, copper and aluminium sectors.
The announcement follows a bold 12 per cent hike in the price of heavily-subsidised diesel on Thursday night, which analysts saw as the government signalling its intent to reinvigorate its stalled and contested reform agenda.
"The move is to attract investment from global brands," Sharma told a press conference, announcing the decision to allow in supermarket groups with strict conditions in a move bound to stir political opposition.
Last December the beleaguered left-leaning coalition government was forced to withdraw the proposal in the face of fierce resistance from shopkeepers, opposition parties and even an ally in the national coalition.
They opposed the change in the law, saying it would destroy the livelihoods of the owners of small shops.
The government sees foreign supermarkets as a way to improve the food supply chain, particularly with investments in refrigerated facilities, as well as a means to create an estimated 10 million jobs and bring down food prices.
Sharma said India was the second-biggest producer of fruit and vegetables in the world, but losses after harvest were estimated at 35-40 per cent meaning more than a third of the harvested food goes to waste.
Among conditions imposed on groups wanting to invest in India, they will have to invest a minimum of 100 million dollars, open stores only in towns with a population of more than one million and source 30 per cent of produce from India.
"Furthermore, the implementation has been left entirely to the decision and discretion of the states of the union," Sharma explained, meaning states opposed to the reform can opt out.
The sale of stakes in the state-run companies and the increased diesel price are aimed at repairing the government's finances which are under strain from slowing economic growth and a growing burden of subsidies.
Prime Minister Manmohan Singh will now face the delicate task of keeping his coalition government together given the known opposition to foreign investment in retail from unreliable coalition partner the Trinamool Congress.
Firebrand Trinamool leader Mamata Banerjee, whose power base is in West Bengal state, said on Thursday that she was angry and wanted the diesel hike reversed.
Sharma said the decision had broad support and that he had consulted state governments, business federations, consumer groups and farmers in a bid to build consensus.
State governments that did not want to implement the new policy were free to ignore the new changes.
"The states who have reservations or who do not wish to implement have their discretion, which is respected in this new policy," he said.
The reform of the aviation sector will potentially throw a lifeline to companies such as debt-laden Kingfisher, which is in desperate need of funds to implement a turnaround plan.
Foreign airlines are currently barred from taking stakes in Indian airlines, though other overseas investors can hold up to 49 per cent.
Under the reform, airlines would be able to purchase up to 49 per cent.
The Indian retail sector is worth an estimated $470 billion in annual sales, with high growth potential as India's 1.2 billion people move towards a more Western-style consumer economy.
- AFP/fa
Source: http://www.channelnewsasia.com/stories/afp_asiapacific_business/view/1226099/1/.html
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