Doubt cast on potential gold rush in India’s retail sector

NEW DELHI - The leader of India’s ruling Congress party has sounded an alarm over fears that big foreign firms looking to enter the country’s retail sector could force millions of mom-and-pop stores to shut.

By (AFP)

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Published: Sat 10 Feb 2007, 4:55 PM

Last updated: Sat 4 Apr 2015, 9:54 PM

Sonia Gandhi has called on the government to ‘consider having the relevant issues properly examined before further decisions’ are taken on giving international retailers more access to India’s lucrative retail sector.

Gandhi turned down the premier’s job when Congress won office but is thought to wield great political power as Congress’ leader, which makes her interjection a significant development.

Her call this week came amid reports that Michael T. Duke, the vice chairman WAl Mart -- the world’s largest retailer -- was due in India on February 22 to partner formally with Bharti Enterprises to start a nationwide store chain.

The Congress leader said in a letter to Prime Minister Manmohan Singh that she had ‘received suggestions from many quarters about the desirability to first study the possible impact of transnational supermarkets on the livelihood security of those engaged in small-scale operations.’

Saumitra Chaudhuari, an economic adviser with ratings agency ICRA, said the issue of opening the retail sector to overseas retail giants was causing political discomfort.

‘I think she wants the government to tread carefully, she basically wants to make sure it does its ‘due diligence’ as companies say,’ Chaudhuari said.

India’s 15 million dusty, chaotic and cramped corner shops fear competition from the giant retailers.

They worry that big, air-conditioned stores with swish, shrink-wrapped produce will drive them out of business, despite assurances from industry figures that the market is large enough to accommodate virtually all players.

Small retailers are already alarmed that India’s biggest private company, Reliance, plans to ‘revolutionise’ the way Indians shop by opening thousands of western-style supermarkets across the country.

‘The retail trade is very labour intensive. For every shop there are five employees or more,’ said New Delhi-based political analyst Mahesh Rangarajan.

‘I think she is saying please fine-tune, don’t rush into this, it’s a complex socio-economic situation,’ he said.

The government still bans foreign retail chains from selling directly to consumers. But they are using a backdoor to enter the market by starting wholesale and sourcing firms, which supply a local retail partner.

Retailers like WAl Mart, France’s Carrefour, Germany’s Metro and Britain’s Tesco have been making a beeline for India’s 300-billion-dollar retail industry.

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