India has finally opened up its retail market to global supermarkets.
Many of you will remember how this plan last year was met with great opposition and had to be swept under the carpet. Now, firms such as Walmart and Tesco's will be able to buy up to a 51% stake in multi-brand retailers.
One has to understand Prime Minister Manmohan Singh's reasoning behind this. Not only will this bring growth into an ailing economy, but it will also generate much needed jobs. However, this was just one of the key reforms announced by the administration. Another would be the decision to allow foreign airlines to buy up to a 49% stake in local airlines to boost the failing aviation industry. This seemed a wise move after a 14% rise in diesel, much of which is subsidized by the government.
Last year, the opposition to this reform consisted primarily of tens of thousands of small businesses, who would be adversely affected by the presence of foreign business. The opposition party (Bharatia Janata party) called it 'a betrayal of democracy'. But Economists say this should be welcomed as it will change the way Indians shop and boost the economy.
Nonetheless, as with any foreign investment in India, there have been some conditions imposed on potential investors. An example would be that investors will have to invest at least $100 million in open outlets in towns with a minimum population of a million and source at least 30% of produce from India.
Multinational companies already have small outlets in India, but they have to deal with local stores. But this reform will allow them to sell directly to the public. The government hopes that this move will lower the price of products, improve the livelihood of farmers and ease supply side inflation.
Let's hope it all works out.
Many of you will remember how this plan last year was met with great opposition and had to be swept under the carpet. Now, firms such as Walmart and Tesco's will be able to buy up to a 51% stake in multi-brand retailers.
One has to understand Prime Minister Manmohan Singh's reasoning behind this. Not only will this bring growth into an ailing economy, but it will also generate much needed jobs. However, this was just one of the key reforms announced by the administration. Another would be the decision to allow foreign airlines to buy up to a 49% stake in local airlines to boost the failing aviation industry. This seemed a wise move after a 14% rise in diesel, much of which is subsidized by the government.
Last year, the opposition to this reform consisted primarily of tens of thousands of small businesses, who would be adversely affected by the presence of foreign business. The opposition party (Bharatia Janata party) called it 'a betrayal of democracy'. But Economists say this should be welcomed as it will change the way Indians shop and boost the economy.
Nonetheless, as with any foreign investment in India, there have been some conditions imposed on potential investors. An example would be that investors will have to invest at least $100 million in open outlets in towns with a minimum population of a million and source at least 30% of produce from India.
Multinational companies already have small outlets in India, but they have to deal with local stores. But this reform will allow them to sell directly to the public. The government hopes that this move will lower the price of products, improve the livelihood of farmers and ease supply side inflation.
Let's hope it all works out.
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