Global brands such as Reebok, Nokia, Louis Vuitton and Gucci will for the first time be able to own and operate their own stores in India after the country‘s communist-backed government last night approved a liberalisation of foreign direct investment rules.
Consent to permit 51 per cent foreign investment in single brand retail operations was the most striking among a package of measures aimed at signalling the Indian government‘s determination to kick-start a stalled programme of economic reforms.
However, the limited relaxation fell short of the wholesale opening of India‘s retail sector that has been privately demanded by the world's most powerful retail groups. Companies including Wal-Mart and Tesco lobbied hard to be allowed into a market dominated by 9m “mom and pop” corner stores.
Last night's package of reforms will nonetheless be seen as a notable boost on the eve of the World Economic Forum at Davos, where a large Indian delegation, including Mukesh Ambani, chairman of Reliance Industries, India‘s largest private sector company, and Nandan Nilekani, head of Infosys, the country's second biggest technology company, will be cheerleading for the Indian economy.
“This is the first time in 15 years that FDI has been reviewed in an integrated manner to remove anomalies and inconsistencies,” Kamal Nath, India's commerce minister, told the Financial Times. “Companies will be allowed to sell goods sold internationally under a single brand. Retailers of multiple brands, even if they are made by the same company, will not be allowed,” he added.
International retailers have until now been able to operate in India only through franchise arrangements with local partners, in contrast to China, which has thrown open its high streets to foreign investors.
India‘s commerce ministry has yet to spell out how it will apply the cautious new policy, which has emerged despite an intense campaign by Indian industrial houses to keep the retail sector closed to foreign competition for as long as possible.