FDI in multi-brand retail:
"Foreign supermarkets will be good for India"
In September this year, the Congress-led government announced its intention to go ahead with controversial plans to allow foreign firms to set up in India with up to 51% ownership of multi-brand retail outlets. This means that foreign chains like Walmart, Tesco and Carrefour will finally be able to open supermarkets in India – though only in cities of at least a million people, and subject to the authorisation of the state government. The plans had first been announced in November 2011, but were quickly put on hold following objections from Congress' coalition partners as well as the opposition BJP. Prime Minister Manmohan Singh and other supporters of the policy argue it is a logical continuation of the successful liberalisation of the Indian economy begun in 1991, and that in current circumstances bold action is required to prevent annual growth slipping below 5%. They argue foreign direct investment (FDI) in retail will boost the economy as a whole, create jobs and benefit consumers. Opponents counter that foreign supermarkets will run local kirana, or mom-and-pop stores, out of business, allowing 'Big Food' to create its own captive supply base and reduce choice for consumers.
Such is the intensity of feeling in some quarters that Uma Bharti, a senior BJP leader in Uttar Pradesh, has vowed to burn down the first Walmart store to open in India, while West Bengal Chief Minister Mamata Banerjee has withdrawn her Trinamool Congress from the ruling UPA II coalition over the issue. But supporters of reform insist critics fail to acknowledge how much the country has already benefitted from globalisation, and warn India will become the laggard among the emerging economies unless it liberalises further. Retail is currently one of the most controlled areas of the economy, and 'organised retail' thus accounts for only around 8% of the $450 billion sector, so there is certainly scope for growth....