Shopping around

20 September 2012 By Jeff Glekin

New reforms will eventually open the door to global retailers like Wal-Mart and Tesco, and will fundamentally change India’s fragmented market. But India’s millions of small shops won’t go out of business any time soon. Competition and consolidation will be good for many of them.

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India’s opposition parties led a nationwide strike on Sept. 20 to protest against the government’s decision to allow foreigners to invest directly in retail operations, taking as much as a 51 percent stake. At present foreign retailers are only allowed to operate joint ventures in wholesale companies.
The proposed reforms would allow individual state governments to decide whether to allow foreign supermarket chains to enter. Foreign retailers would have to source almost a third of their manufactured and processed goods from industries with a total plant and machinery investment of less than $1 million.
They would have to invest a minimum of $100 million, and put at least half of their total investment into so-called ’back-end’ infrastructure, such as warehousing and cold storage facilities. Retailers would also only be allowed to set up shop in cities with a population of more than 1 million.

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