Indian Retail Remains Elusive to Investors

Although there has been increased interest for retailers to enter the Indian markets, retail in India has remained in it infancy.  One example is food distribution.  This is done through small “Kirana Stores” or “public distribution shops.” Supermarkets or shopping centers, even according to Western patterns exist in India only in recent years. This has resulted in a  highly restricted focus distribution shops.” on consumer needs, thus creating a problem for large scale foreign investments to spur growth.

Now despite a slow start, there is a modern Indian retail sector beginning to emerge.  In 2006  although the industry went through a tremendous change  foreign companies still did business in Cash & Carry up to 100 percent and single-brand stores up to 51 percent. In contrast, foreign investors continued operation of multi-brand stores, such as department store chains or supermarkets in a limited sense.

It was therefore all the more surprising that the Indian Ministry announced for Industry and Commerce in the summer of 2010, to allow foreign retailers in the foreseeable future investments up to an investment limit of 49 percent in multi-brand trade. The government, combined with this step is incorporating  involvement of external providers in order to modernize an inefficient trade system as well as the general infrastructure. However, with such a step only the legal barriers to entry are reduced. Foreign retailers will continue to have to deal with the fact that it is unclear whether India’s new retail formats, such as large supermarkets and discount stores, will come on board at all.

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