India may OK FDI in retail in 2 weeks

After years of "will she, won't she" speculation, reports say that India may finally allow foreign firms to jump into so-called "multi-brand retail."  

The plan envisages allowing foreign chains such as Walmart and Tesco to hold up to 51% stake in Indian ventures, according to the Times of India, which cites government sources as saying that the prime minister's cabinet could approve the proposal as soon as August.

A panel of secretaries is expected to approve the framework for allowing global retail chains to set up shop in India later this month, the paper said.

The 51% limit is higher than numbers touted in previous discussions — allowing foreign players the majority stake they say is imperative if India wants to see a real boom in investment. But there may be some riders. 

For instance, TOI says state governments can decide whether foreign chains are welcome or not. Similarly, the government intends to allow these chains to operate in large cities only — and the definition of large is not yet clear. If the cut-off is fixed at one million population, then the retailers can open stores in around 50 cities. But if the bar is raised to 10 million, then only Delhi, Mumbai and Kolkata will make the cut, the paper said. 

For years, debate has raged over whether big box foreign chains would put India's tiny mom and pop stores out of business, and thus increase unemployment, or whether the foreign players will stimulate growth, reduce agricultural wastage, and ensure that workers benefit from existing laws governing minimum wages, safety standards, etc. 

You can read more about that in my article on Wal-mart's struggles in India.…