Indian Retail Market in Flux

20 December, 2007 – Unrest is rife in the lucrative Indian retail market, the world’s fifth largest, as big business seeks to move in to tap potentially huge new revenue streams.

But large companies have had to either cut back or even postpone plans in the wake of protests as thousands of small traders fear for their livelihoods.

Reliance Industries Ltd (RIL) has run into a number of problems as it attempts to open a string of grocery stores. Fierce protests against their plans have taken place in many states and the company will now fail to meet its target of opening at least 500 shops next year.

Last year, RIL launched a multi-billion dollar retail venture under Reliance Retail Ltd. Company officials have been reported as saying the outfit plans to triple its number of stores by opening over 1,000 new outlets in the next four years. But analysts have questioned how realistic this propsal is given the current deep-seated opposition in some quarters. 

Bharti Enterprises has also announced it intends to start a chain of grocery stores in the north of the country; starting with a number of small ventures before moving up to medium and larger ones.

The company has formed a joint venture with supermarket giant Wal-Mart to inaugurate more than 12 hypermarkets by 2017 that will sell to purely to other businesses.

Analysts believe India’s retail market will soar to US$165 billion over the next 10 years.

In a bid to attract investment from abroad, the government is said to be making another attempt to expand foreign direct investment (FDI) in multi-brand retail sector.

This move would allow foreign retailers like Carrefour, Wal-Mart and Metro to enter the Indian market through joint ventures for multi-brand stores. 

At present, foreign retail outfits are obliged to enter into licensing agreements with Indian companies to set up in the country, as the current regulations permit up to 49 percent FDI in single-brand retail ventures. 

But it is expected any proposals would come under tough scrutiny from left wing organizations who will be keen to ensure strict regulation on foreign investors’  role in any Indian venture.

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