The Indian government has loosened restrictions on foreign investment in retail, paving the way for Wal-Mart to open retail stores here.
The Indian government has announced economic reforms that would allow Wal-Mart retail stores to enter India in a bid to increase foreign capital flows and rebuild the current government's tarnished credibility on the subcontinent and abroad.
The move Friday ends three years of policy inertia and headlines dominated by corruption, which has seen the economy in India plummet from nearly 10 percent growth to under 6 percent. The ruling Congress Party is now trying to move the conversation away from the subject of corruption by demonstrating it can still get major initiatives done.
“The sudden push for reforms seem to be born out of desperation,” says Arun Jethmalani, the managing director of ValueNotes, a market intelligence and consulting firm based in Pune, India. “The [economic] situation has gotten so bad in India, that some people in the government are finally realizing that we have to do something immediately.”
Under new rules, a previous ban on foreign investment in multi-brand, big-box retail stores like Wal-Mart has been relaxed to allow foreign shares of up to 51 percent.
The changes will also open the door for single brand foreign investors such as the Swedish furniture store IKEA, by allowing investors to own outlets outright without needing local partners. Restrictions will also be relaxed on foreign investment in airlines, broadcasting, and power exchanges.
India’s Prime Minister Manmohan Singh argues the reforms will boost the economy by injecting foreign capital and introducing foreign expertise in supply-chain management.