India said yesterday plans to open its vast retail sector to global supermarket chains will create millions of jobs after the cabinet approved the long-awaited reforms.
The pledge by Commerce Minister Anand Sharma came after heated opposition protests stopped the government announcing details in parliament about its move to relax foreign ownership rules for retailers such as Wal-Mart.
The changes would push India further towards a modern consumer society but they are contested by opposition lawmakers who fear large supermarkets will kill small family-run stores where most Indians now shop.
The reforms will “give a fillip to job creation,” creating five to six million jobs in transport and other logistics over three years, Sharma told a news conference.
The government plan will open up the sector, worth an estimated $470 billion in annual sales, to allow Wal-Mart, Tesco and other global firms to hold a 51 per cent stake in multi-brand retailers.
The cabinet also raised the foreign investment cap to 100 per cent from 51 per cent for single-brand retail operations such as Gucci, Nokia and Reebok.
The Congress-led government has been seeking to fend off charges of “policy paralysis” after being engulfed in a string of corruption scandals.
Its decision, called a “game-changer” by India’s business leaders, was seen as a sign of its intent to press ahead with a reformist agenda despite strong political opposition.
Foreign multinationals have lobbied for years to sell directly to consumers in the world’s second most populous nation.
Multi-brand foreign groups such as US-based Wal-Mart currently operate as wholesalers in India but are prevented fromselling directly to the public. The vast majority of consumers currently shop at small local markets.
Critics are worried that modern, large-format stores will drive small shops out of business, despite assurances from industry figures that the growing market is big enough to embrace all models.
Currently, family-run stores account for 90 per cent of the sector, the second-largest employer after agriculture in a country of 1.2 billion people.