India to relax rules on foreign retailers

The Indian Government has signaled for the first time that it is prepared to allow some foreign retailers to enter the country freely. At present this is not allowed without a local joint venture partner.

The Government has been discussing the potential change to the laws with global retailers such as Wal-Mart and Tesco. 97 per cent of all Indian retailing is conducted through market stores, or street outlets, known as unorganized retail. Most of the rest of India’s goods are sold through Western-style retailers based in shopping malls, or organized retail. There is no such thing as high street retailing.

The Indian Government is reluctant to allow in mass-market foreign retailers because they could put many of the hundreds of millions of people who rely on retailing for their livelihoods out of business.

The Indian retail market grew by about 7.5 per cent last year, with the value of sales through shopping malls rising by 30 per cent.

The number of shopping malls, which were virtually non-existent five years ago, now stands at about 300. Many more are in the pipeline, potentially creating huge opportunities for foreign retailers.
At the moment only a handful of foreign retailers, such as Marks & Spencer, Benetton Dior and Lacoste, are allowed to operate in India, and then only through franchised outlets.

But many more are keen to enter the market, with Debenhams, Mothercare and Clarks already planning to open stores via franchisees this year. Next is also thought to be negotiating a franchise agreement with Planet Sports, the company that operates stores for Debenhams and Marks & Spencer in India.