India: reformulated the law of the retail sector

New reverse by the Indian Government on the reform of the retail sector in India. On 10 January 2012, New Delhi introduced a regulation on foreign direct investment, aimed at the liberalization of the sector. The current law prepared by the Government allows FDI equal to 100% in the retail trade of mono-brand products: today in India FDI is therefore prohibited for multi-brand retail, but up to 100% is allowed for single-brand retail. However, considering the latest vicissitudes, it is not excluded that the situation could evolve again in the coming months.

The first go-ahead was given on November 24 of the past year: on that occasion New Delhi had undertaken one of the most important economic reforms in India. The law provided for the almost total removal of the ceiling on FDI, so that foreign companies could hold up to 100% of mono-brand stores and up to 51% in multi-brand stores (including supermarkets). Until then, New Delhi did not allow foreign direct investment in the multi-brand store and allowed foreign companies up to 51% of shares in the single-brand store. Following this decision, the governments of the states of Tamil Nadu, Uttar Pradesh and West Bengal announced their firm opposition and consequently the Indian government decided to withdraw the law completely.

These are the advantages deriving from the new law of January, which will have important repercussions also from a social and economic point of view:

• Indian consumers will have more choice
• Indian retailers will be able to count on the 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 of the logistics networks
• greater transparency will be ensured, especially in the agricultural sector
• there will be a drop in inflation, a real thorn in the side of the Indian economy

Although the initial reform has been modified, it is still a historic decision that will radically change the landscape of Indian retail: this sector, whose turnover is around USD 450 billion a year, is therefore ready to explode .

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