India to open retail sector to investors

Indian prime minister Manmohan Singh has announced that India will soon allow direct foreign investment in the nation’s retail sector.

His comments came while officials of US retail giant Wal-Mart were in India to discuss the company’s plans and gave the company an indication that they will soon be allowed to participate in the country’s $180 billion retail market.

Some are concerned, though, about the cultural impact the entry of companies like Wal-Mart into an industry that is currently made up almost entirely of small family-owned and family-run businesses. Large retailers now only control about 3 percent of the retail market in India.

The impact would be great even in large cities such as New Delhi. With its population of 14 – 15 million people, most food is still purchased from street markets, door-to-door sales, and small corner markets.

There is also a concern that the entry of foreign retailers would result in a flood of imported goods into the country. But the change will likely come soon. When asked when “soon” might come, Mr. Singh said that the change would probably come sometime this year.

A senior government official said later that the change might be lifted as soon as July, before the prime minister meets with US president George W. Bush.

Story link: India to open retail sector to investors