India allowed foreign single-brand retailers to open stores in the world’s second-most populous nation, paving the way for Starbucks Corp. and Ikea to start outlets without local partners.
The government Tuesday ratified a Nov. 24 cabinet decision to raise the ownership limit to 100 percent from 51 percent, Trade Minister Anand Sharma said in a statement. The companies will need to buy 30 percent of the value of products sold from domestic small and cottage industries, he said.
The move underscores Prime Minister Manmohan Singh’s pledge to sustain his market-opening campaign for India even after he reversed a decision to let multi-brand companies such as Wal- Mart Stores Inc. and Carrefour SA open supermarkets in India’s $400 billion retail market. Singh’s administration has struggled to advance its initiatives, slowed down by opposition from its own allies and a corruption scandal that paralyzed parliament.
A large coffee sits on a table at a Starbucks coffee shop in Florham Park, New Jersey. (Bloomberg)
“This is a welcome move with a clear potential to lift the general mood in the economy,” Rajan Bharti Mittal, managing director at Bharti Enterprises, Wal-Mart’s Indian partner, said in an e-mailed statement. “We hope the initiative is a precursor to further liberalization in the sector in the days to come.”
Nivedeeta Moirangthem, Ikea’s India spokeswoman, didn’t immediately reply to an e-mail seeking comment. A call and an e- mail to Starbucks’s public-relations team in Seattle weren’t immediately answered. Starbucks signed an agreement with India’s Tata Coffee Ltd. in January 2011 to source beans and consider opening stores.
Singh’s allies and other parties opposed the multi-brand retail opening unveiled in late November, saying it would hurt local mom-and-pop type stores. The government suspended the decision Dec. 7.
The prime minister said in a Dec. 14 interview that “India remains committed to a system of regulation that is supportive of enterprise and we will do everything to encourage foreign investment.” He said he would renew the multi-brand retail initiative after regional elections early in 2012.
Allegations of corruption against Singh’s cabinet colleagues have stalled economic policies, leading to a 25 percent drop in the benchmark BSE Sensitive Index and a 16 percent decline in the rupee last year.
(Bloomberg)
