| In a drive to boost growth and economic reform in India, prime minister Manmohan Singh has decided to open up the retail sector to foreign investors. After much debate, the Foreign Direct Investment policy was amended on September 14th to allow 51 percent FDI in the multi-brand retail sector – a move that has generated mixed feedback from the public.
Those in favour of the reform support the government’s rationale to shore up the economy by encouraging foreign investment and the wider range of choice that this will entail for the average consumer: Walmart and Apple for example are already making tracks to launch their stores and the iPhone 5 respectively within the next 12 – 18 months. Skeptics on the other hand are protectionist of the market and fear that the amendment will mean the demise of small shopkeepers and farmers. The only ‘quirk’ that potential retailers faced initially, which formerly created a spanner in the works for some, was the 30 percent requirement. In other words, the government originally stated that it was entitled to block major retailers from establishing a presence in India if they did not buy 30 percent of their supplies in India. This proved to be an obstacle for retailers like Ikea. However, it appears now that the government has relaxed this requirement and has stipulated that the ‘obligation’ would now be voluntary. The liberalisation of the market comes on the back of stinted growth in India in the last few years. Though this tune-up sees the government heading in the right direction in terms of strengthening competition and collaboration in the market, cynics wonder whether the new measures will ever truly eventuate (refer to New York Times article – “Doubts greet India’s overture to foreign retailers” – September 19th 2012). |
Will skepticism overshadow India’s latest move to liberalise the retail sector?
