India May Put Foreign Retail Opening on Hold

By Karthikeyan Sundaram - Dec 3, 2011 10:35 PM GMT+0700

India may put on hold a Nov. 24 decision to allow foreign ownership in multibrand retail chains until there is a political consensus on the issue, the Press Trust of India reported today, citing West Bengal Chief Minister Mamata Banerjee.

Banerjee spoke to reporters in Kolkata after meeting with Indian Finance Minister Pranab Mukherjee today, PTI said. Her party, Trinamul Congress, is an ally of Prime Minister Manmohan Singh’s government in New Delhi.

India’s decision to allow as much as 51 percent foreign ownership in multibrand retail chains is likely to benefit local merchants’ credit profiles as they gain access to equity and improved liquidity. Shops and markets across India were shut on Dec. 1 as traders supported a daylong strike demanding the government not allow overseas retailers like Wal-Mart Stores Inc. (WMT) from opening outlets.

Owners of family-run stores, the backbone of an Indian retail market that London-based Business Monitor International expects to double in size to $785 billion by 2015, fear they will be forced out of business by foreign companies.

D.S. Malik, a spokesman for the finance ministry in New Delhi, didn’t respond to three calls to his work phone and three to his mobile phone after office hours. Harish Khare, media adviser to Prime Minister Singh, didn’t respond to three calls to his mobile phone.

India’s retail industry will get investments of $8 billion to $10 billion over the next five to 10 years as overseas competitors enter and local companies spend to keep pace, according to billionaire Kishore Biyani, founder and managing director of Pantaloon Retail India Ltd, the country’s largest chain by market value.

Wal-Mart currently has 14 wholesale outlets through a joint venture with Bharti Enterprises, Germany’s Metro AG owns six and France’s Carrefour SA (CA) announced the opening of its second wholesale store on Nov. 28.

Allowing foreign investments will create up to 10 million jobs and give farmers better prices, India’s Commerce Minister Anand Sharma said on Nov. 25.

To contact the reporter on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net

To contact the editor responsible for this story: Dick Schumacher at dschumacher@bloomberg.net