Delhi’s decision to block foreign supermarkets in the capital–one of the few markets that matter in India–is bad for the city and for the country, some analysts said Tuesday.
As India looks to attract more foreign investment, New Delhi’s flip flop on accepting foreign investment in multi-brand retail in the capital sends the wrong signal, the analysts said.
“Delhi is one of the key metro markets, keeping it out of reach of retailers may significantly reduce the attractiveness of an India investment for any major retailer,” said Deep Mukherjee, a director at ratings agency Fitch. “This uncertainty with respect to change of guard at the state level will always be a problem for any long-term investor in the retail space.”
The new Aam Aadmi Party-led government in New Delhi this week asked the Department of Industrial Policy and Promotion to remove Delhi’s name from the list of cities which allow multi-brand retail stores. Multi-brand retail is Indian bureaucratic speak for retail stores that carry more than one brand, such as supermarkets.
Big global brands used to only be able enter India through franchises, wholesale stores or single-brand stores, such as clothing shops. That kept out big supermarkets such as those run by Wal-Mart Stores Inc.
Last year India opened the retail sector to allow foreign retailers to own up to 51% in local supermarkets. It asked the state governments to make the final decisions on allowing multi-brand stores.
Since then, eleven of the country’s 22 states–including Delhi–decided to allow multi-brand retail outlets.
Last month, however, the Aam Aadmi, or common man, Party, took control of Delhi in state elections after promising it would block foreign investment in retail, concerned it would hurt the mom and pop stores that dominate the sector.
Keeping foreign funds and expertise out of the sector will hurt consumers and delay the modernization of India’s outdated supply chains, said some industry groups.
via Kejriwal’s Foreign Shop Ban is Bad for Delhi – India Real Time – WSJ.
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