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India Panel Recommends Allowing Overseas Companies in Retail

An Indian panel is recommending to the country’s council of ministers that overseas companies be allowed to own stakes in stores that sell more than one brand, provided they invest at least $100 million.

“The government will consider and take an early, appropriate and correct policy decision,” Trade Minister Anand Sharma said in parliament today. “The recommendations of the committee of secretaries are very specific. There has to be a defined percentage which will go only into the building of infrastructure, and the minimum investment as has been recommended should not be less that $100 million.”

India’s laws bar foreign ownership in multi-brand retail operations. Overseas investors are allowed 51 percent ownership in retail shops selling only one brand, and 100 percent in wholesale stores. Wal-Mart Stores Inc. (WMT) and Carrefour SA (CA), who already operate wholesale outlets in India, are seeking to expand in a market that Business Monitor International estimates may double to $785 billion in 2015 from $396 billion this year.

“More investments will come in once the front linkages are established,” said Sharma. Foreign investment in retail could help to generate “millions of jobs” in the country, he said.

Shares Gain

Indian retail-chain operators gained or pared losses. Shoppers Stop Ltd. (SHOP) rose 4.3 percent to 409.75 rupees at the 3:30 p.m. close in Mumbai. Trent Ltd. (TRENT) advanced 0.2 percent to 1,205.5 rupees. Pantaloon Retail Ltd. (PF), the nation’s biggest, pared losses after dropping as much as 6 percent earlier today. The stock fell 1.9 percent to 321.05 rupees. The Bombay Stock Exchange’s Sensitive Index declined 0.9 percent.

The government has not formally received the recommendations, Sharma said.

The panel, which met on July 22, recommended half the jobs generated by foreign investors in retail should be in the rural sector, and at least 30 percent of all products should be sourced from small and medium enterprises, according to Sharma.

Carrefour can help in modernizing distribution in India, Florence Baranes-Cohen, spokeswoman of the retailer based near Paris, said last month.

Allowing overseas ownership in multi-brand retailing would help cut waste, Raj Jain, chief executive officer of Wal-Mart’s India venture said in May.

India loses as much as 40 percent of its food grains and fruit and vegetables after harvest due to the lack of proper storage facilities and poor infrastructure, according to Sharma. Food-price inflation in the world’s second-most populous nation has averaged 10.56 percent this year.

To contact the reporter on this story: Malavika Sharma in New Delhi at msharma52@bloomberg.net.

To contact the editor responsible for this story: Frank Longid at flongid@bloomberg.net.

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