The congress-led UPA government of India last night approved sweeping reforms in foreign direct investment (FDI) as a first step towards opening retail markets to foreign investors.
However, the cabinet approval for 51 per cent FDI in retail only extends to single-brand retailers such as Zara and Marks & Spencer. So this restriction could prevent supermarket giants such as Wal-Mart and Tesco - which sell an array of goods - from extending their presence in India.
The long-awaited announcement means that retail joins a raft of recently liberalised industrial and economic sectors in India and comes on the eve of today's World Economic Forum meeting in Davos where the economies of India and China are a key theme.
The decision to limit ownership to 51 per cent is aimed at attracting investment while protecting small retailers in the country, said the Indian government.
'This does not cause any replacement or displacement in any way as it is already happening through franchise,'' said Commerce Minister Kamal Nath. ''Retailing of goods of multiple brands, even if such products are produced by the same manufacturer, would not be allowed.''
'There would be no restriction on the number of retail outlets but guidelines would be framed to fix the norms of entry,'' said Nath.
Drapers' Sourcing and Selling Fashion in India Conference takes place next Tuesday. Details at www.fashioninindia.co.uk
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