Last Thursday, the Indian cabinet agreed to allow global supermarket chains such as Walmart and British-owned Tesco to open up shop in one of the world’s fastest growing retail markets.
Opposition to the decision has been particularly fierce, and brought India’s parliament to a standstill.
The specifics of the agreement are that there can now be 51 per cent foreign ownership of companies of multi-brand retail stores – up from 10 per cent. It will also allow 100 per cent foreign ownership of single brand retail—such as Reebok.
One politician, from the main opposition Bharatiya Janata Party (BJP), called the decision “a tool to kill the domestic retail industry”. Jayalalithaa Jayaram, Chief Minister of the state of Tamil Nadu, slammed the government’s decision to let in “hyper markets.”‘
Foreign direct investment (FDI) has long been a divisive issue in India.
Proponents argue that foreign investment in retail will create an estimated 10 million jobs. They also argue that it will help modernize India’s agricultural processing, transportation, and distribution chains. Currently, about 40 per cent of Indian farmers’ produce spoils before it reaches consumers.
Opponents, however, say that the arrival of foreign multi-nationals will be a disaster for India’s small businesses. India has 11 shops per 1,000 people, the highest ratio in the world. 95 per cent of these are small employer firms. Tesco and Walmart coming in will mean massive job losses and leave India overly reliant on foreign food supplies.
Speaking Tuesday, Indian Prime Minister Manmohan Singh defended his decision and pushed the opposition to end the deadlock over FDI so the Parliament can focus on top legislative priorities such as a strong anti-corruption bill.
The Times of India offers its readers a primer on this “raging debate”, outlining the arguments from each side before listing the reasons it supports FDI.