Supermarket chains are looking for funding in a tough business environment, with foreign partners closed off for now after last year's indefinite suspension of a move to open the $450 billion retail market to giants such as Wal-Mart Stores Inc.
Also Read: Indian retailers start to scale down as reforms hopes are dashed
The government had hoped the major reform would boost investment in Asia's third biggest economy, but it quickly backtracked when it came up against fierce opposition from across the political spectrum and from traders' unions.
Following are five facts on India's retail sector:
1) The retail sector in the nation of 1.2 billion people is estimated to have annual sales of $450 billion, with nearly 90 per cent of the market controlled by tiny family-run shops.
2) Organised retail, or large chains, makes up about 10 per cent of the market, but is expanding at 20 percent a year. This is driven by the emergence of shopping centres and malls, and a middle class of close to 300 million people that is growing at nearly 2 per cent a year.
3) India has recently allowed 100 per cent FDI in single-brand retail subject to certain sourcing restrictions, paving way for global chains to have full ownership of their India operations. So far US-based coffee giant Starbucks has signed a memorandum of understanding (MoU) with Tata Coffee
4) Earlier, the government had passed the measure to allow 51 per cent FDI in multi-brand retail. However, it was forced to be put in on the backburner after vociferous opposition from other political parties who alleged that they had not been consulted on the matter. FDI in multi-brand retail is being seen as a key to get much-needed foreign funds into the country
5) India also allows 100 per cent FDI in cash-and-carry, or wholesale, ventures. Restrictions on foreign investment in front-end retail exist because of opposition from millions of small shopkeepers who are valuable vote banks during elections.
Copyright @ Thomson Reuters 2012
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