India’s legislators OK retail policy

Parliament approves government plan on foreign investment

A customer examines fruit at a small retail store in Kolkata, India. India’s Parliament on Friday approved the government’s plan to open up the country’s retail sector to international companies.

A customer examines fruit at a small retail store in Kolkata, India. India’s Parliament on Friday approved the government’s plan to open up the country’s retail sector to international companies.

Saturday, December 8, 2012

— India’s Parliament on Friday approved the government’s plans to open up the country’s huge retail sector to international companies such as Wal-Mart.

Prime Minister Manmohan Singh’s government won the vote in the upper house of Parliament on Friday, two days after it had won a similar approval in the powerfull ower house.

The retail policy will enable Wal-Mart, Carrefour SA and Tesco Plc to step up their presence in the world’s second-most populous nation to tap a market that Technopak Advisors Pvt. estimates will expand to $725 billion by 2017.

In 2007, Bentonville-based Wal-Mart formed a joint venture in India for wholesale stores and has been building a supply chain and logistics network in the country.

Wal-Mart owns a 50 percent stake in the wholesale venture with Bharti. Closely held Bharti runs its own chain of more than 186 Easyday stores, including supermarkets. Bharti Airtel Ltd., India’s largest mobile-phone carrier, is a part of the Bharti group.

A loss in Parliament this week would have been an embarrassment for the government, but would not have stopped the retail measure from being implemented after the Cabinet in September decided to allow foreign companies to own 51 percent stakes in supermarkets and other big retailers for the first time.

However, individual states will be able to decide whether to let the retailers operate in their territory. So far, 10 states have said they will not allow big-box retailers in.

The opposition forced the government to seek a vote on the issue in Parliament after stalling proceedings in the two houses for days last month.

The policy, debated for years by political parties, will allow foreign retail chains to do business in India and enable the government to carry forward reforms that will shore up a slowing economy and bring in a fresh infusion of investments, which could also help farmers and small businesses.

The United States, which has long urged the opening of India’s multibrand retail sector, welcomed the parliamentary approval. State Department spokesman Mark Toner said U.S. companies are keen to invest and this would deepen economic cooperation between the two countries.

“We believe direct foreign investment will grow markets in India as it has in China, Brazil and many other development economies,” Toner said at a news briefing in Washington.

Commerce Minister Anand Sharma said the measure would improve supply chains and would give Indian farmers new customers. At present, he said, 30 to 40 percent of fruits and vegetables grown in the country rot in the field because of a lack of proper procurement and cold-storage facilities, causing an annual loss of nearly $9.2 billion.

Deputy Governor of the Reserve Bank of India Subir Gokarn said the foreign investment in multibrand retail could also help bring down food prices, a major driver of inflation that’s the highest among the largest emerging economies.

However, opposition parties said the new policy will crush small retailers not able to withstand the competition from the global giants.

India will become a country of sales girls and boys, where shops run by American and British companies will sell mostly Chinese goods, warned Arun Jaitley, a top opposition BJP leader.

Information for this article was contributed by Matthew Pennington of The Associated Press and Bibhudatta Pradhan and Malavika Sharma of Bloomberg News.

Business, Pages 29 on 12/08/2012