India: new reform in the retail sector

On November 24, the Indian government finally gave the green light to one of the most significant economic reforms undertaken by New Delhi in India’s retail sector. The new law, which had been long awaited, will revolutionize the retail sector: from now on, there will no longer be a cap on FDI, and foreign companies will be able to own 100% of single-brand stores and control up to 51% of multi-brand stores (which also includes supermarkets). Until now, New Delhi did not allow foreign direct investment in multi-brand stores and permitted foreign companies to hold up to 51% of shares in single-brand stores.

This is a historic decision that will radically change the landscape of Indian retail: in the case of single-brand stores, foreign companies will no longer necessarily have to establish partnerships with local companies, while in multi-brand stores, they will be able to open their own points of sale after finding a local partner, without resorting to cash & carry anymore.

This reform will transform some sectors, including luxury, supermarkets, and agriculture, and will also have significant repercussions from a social and economic point of view.

Indian consumers will have more choices

Indian retailers will be able to count on an influx of money from abroad

– there will be the creation of new jobs and, thanks to wider competition, a general lowering of prices

– there will be a modernization of the sector and logistics networks, and better product preservation

– greater transparency will be ensured, especially in the agricultural sector, which has until now been dominated by intermediaries

– local kirana shops will have to modernize to remain competitive

– there will be a drop in inflation, a real thorn in the government's side

The Indian retail sector, with an annual turnover of around 450 billion USD, is therefore poised for a definitive explosion. However, it must be considered that not all states are in favor of this decision: the governments of Tamil Nadu, Uttar Pradesh, and West Bengal have already announced that they will oppose and work to block the law. The situation is different for the states of Gujarat, Maharashtra, Rajasthan, Haryana, Andhra Pradesh, Punjab, and Orissa, which will support the reform.

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