| NEW DELHI
NEW DELHI Jan 13 The newly elected provincial
government in India's national capital on Monday barred foreign
supermarkets from setting up shop, a blow to Prime Minister
Manmohan Singh's efforts to attract overseas investment and
revive the economy.
Singh had thrown open the country's $500 billion retail
industry to foreign investors in late 2012, allowing companies
such as Wal-Mart Stores Inc and Tesco PLC to
own a majority stake in local chains for the first time.
But the policy was pushed through in the teeth of fierce
opposition from domestic retailers and political parties, who
said it would cause mass job losses in a sector that is mostly
dominated by small, family run shops.
Moreover, strict sourcing norms and a requirement that
companies must ask permission from local state governments
before opening stores have made most supermarket giants wary.
Last month, Britain's Tesco was the first to take the
plunge, announcing it would buy a 50 percent stake in Trent
Hypermarket Ltd, which is part of the Tata group.
The decision by the newly-formed Common Man party government
in Delhi to shut out foreign supermarkets could further dampen
investor appetite. The move overturned the stance of the
previous, Congress party-led administration.
"If one party reverses the decision of its rival
dispensation upon change of guards, the policy and political
risks for global investors would definitely increase in India,
scaring them away," said D.S. Rawat, the director general of a
business lobby group, ASSOCHAM.
The Common Man party's victory on an anti-corruption
platform in Delhi in December shocked mainstream parties. The
new chief minister, Arvind Kejriwal, had promised to scrap the
state's existing retail policy during his campaign.
The country's main opposition Bharatiya Janata Party (BJP),
which hopes to unseat Singh's Congress party government in a
federal election due by May, has also threatened to block the
entry of foreign supermarkets if it wins.
The political backlash against letting in foreign retailers
means that only 11 out of India's 28 states have agreed to roll
out the policy. Most are states where Congress is in charge.
India previously allowed 51 percent foreign investment in
single-brand retailers and 100 percent for wholesale operations,
a policy Wal-Mart, among others, had long lobbied to free up
Indian retailers have operated supermarket chains in India
for years, but their expansion has been hampered by a lack of
funding and expertise as well as poor infrastructure, which
makes the cold storage of food transported around the country