India moves to open up $450 bln retail sector

A top Indian government panel has approved a plan to allow foreign direct investment in the country's vast retail market in what would be one of the country's biggest economic reforms. But it said investors would have to put in at least $100 million to set up multibrand retail stores and would only be allowed to operate in cities with at least one million people, the Press Trust of India said late Friday. The proposal to more fully open up the Indian retail market, whose annual sales are estimated at around $450 billion, now must go to the federal cabinet for approval and then overcome widespread political opposition. The move would mark one of the biggest reforms by India's Congress-led government. But analysts say it could be difficult for the embattled government to push through the major changes as it fends off a slew of corruption charges. Multi-brand foreign groups such as US-based Wal-Mart currently operate as wholesalers but cannot sell directly to the public, amid fears that big international retail chains could swamp small family-run stores. India's tight foreign investment rules are aimed at protecting small "mom-and-pop" stores in the sector where less than 10 percent of consumers shop in bigger, well-known department stores. The policy change would mean foreign retailers could start selling to Indian shoppers through partnerships with Indian retailers and be allowed to hold up to a 51 percent stake in local joint ventures. India has already allowed 51 percent foreign investment in single-brand retail operations such as Nokia or Reebok and 100 percent in wholesale cash-and-carry operations. "Step-by-step, we're moving closer to opening multi-brand retail in India to FDI. This will invite a lot of interest from retailers the world over," said Kishore Biyani, chief executive of leading Indian retailer Future Group. Large retailers such as Wal-Mart and France's Carrefour have been lobbying India's government aggressively to open the consumer market to foreign chains as they seek to grow outside saturated Western markets.