Foreign direct investment by multi-brand retailers is forbidden under Indian rules. However, last week the government effectively created a loophole designed to help maintain economic momentum.
The change means that any company can be deemed Indian-owned so long as a foreign investor does not hold a majority stake. That company may then make investments, even if they are in restricted sectors such as multi-brand retail.
Indian retail tycoon Kishore Biyani, founder of Future Group, told the country’s Economic Times: “This opens the way for front-door entry of foreign direct investment in organised retail.” Biyani said the change would help a sector in need of investment.
However, Patrick Woodall, managing director of retail consultancy Pragma, was doubtful that the new Indian stance would have a big impact.
He said: “While the rules have changed, one has to look at the business culture of India and consider whether the competitive advantage is in doing it yourself or working with what are very professional groups.”
Marks & Spencer, Tesco and Wal-Mart are among the global giants to have already struck partnerships with Indian retailers.
Reliance Retail is reported to be in preliminary negotiations with a large retailer to set up an alliance for its main 750-shop business.