Delhi has barred foreign companies from opening multibrand stores in its state, after a u-turn on a pro-foreign direct investment (FDI) policy, reports Inside Retail Asia.
The leader of the Delhi government, Arvind Kejriwal, implied FDI would drive up unemployment, hence the reason for its decision.
“We agree that FDI in retail improves consumers’ choices to an extent but the Aam Aadmi Party (AAP) does not wish to increase unemployment… Delhi is not prepared for FDI,” Kejriwal is reported as saying.
Although FDI in multibrand retail has federal backing, its implementation depends on individual states.
The move will prevent retailers like Tesco, which recently received approval to initially invest US$110m in the country, from opening its own stores in the state. It has partnered with Tata Group’s Trent to build on Star Bazaar’s 16-store network in Maharashtra and Karnataka states, with an expansion plan of opening three to five stores per year.
Meanwhile, US retail giant Walmart has ended its six-year-old joint venture with Indian partner Bharti Enterprises due to the strictness of rules in foreign investment.
Walmart has also reportedly asked the federal Indian government to reduce the mandatory local product sourcing level from 30 per cent to 15 per cent, saying it cannot meet the stipulated level required to open multi-brand stores in India.
“The company had said that it cannot meet the mandatory 30 per cent sourcing norm and can procure only about 20 per cent from small units. But it has asked to reduce it to 15 per cent,” sources told dayandnightnews.com.
India’s Department of Industrial Policy and Promotion (DIPP) is understood to have told Walmart the government will not ease this clause.
The clause requires foreign multi-brand retailers wishing to set up stores in India to source at least 30 per cent of the value of manufactured and processed products from small- and medium-scale Indian industries at the start of business.
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