Published
Sep 19, 2012
Sep 19, 2012
India loosens up foreign direct investment for multibrands
Published
Sep 19, 2012
Sep 19, 2012
After having changed the law on foreign investment for single brand retailers earlier this year, the recent decline in international investments has pushed India to do the same for multibrands.
Manjunath Kiran/AFP |
With this reform, foreign companies will be able to own 51% of their subsidiaries. However, the text also includes a condition stipulating that international companies holding more than 51% ownership must source 30% of their supplies from local producers.
The purpose of such "fine print" is to calm the lobby of independent retailers, whose five million members have been blocking the "51% rule" for years. However, the measure also has a purely political aspect. The relaxation is intended to lower distribution prices as a means to offset an expected increase of 12% on the price of diesel.
With this extension of the new rules to multi-brands, the Indian market is completely opening the door to international supermarket chains, First in line are British Tesco or American Walmart, which will likely seize this opportunity to invest in a market estimated at 400 billion dollars and a population one billion strong.
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