India opens up to Western consumer goods

Foreign direct investment reforms to its consumer goods market — which will allow greater participation from foreign companies — have been approved by India's parliament.

“Driven by the twin engines of economic growth and favourable demographics, the Indian consumer goods market continues to evolve rapidly, and is predicted to expand by a staggering 15–20% over the next five years to reach $1.3 trillion by 2020,” according to the UK India Business Council (UKIBC).

It explained: “The approved reforms now permit Indian states to allow FDI [foreign direct investment] of up to 51% in multi-brand retail, opening the way for Tesco's and others to open supermarkets in India.

“The reforms also introduce new and welcome flexibility in the requirement that foreign-owned single brands must source 30% of their products from small Indian industries. International firms seeking a waiver on this sourcing provision now have the option of establishing their own factories in India. The UKIBC welcomes the outcome of the Parliamentary vote and expects that the reforms will, over time, be of significant benefit to the Indian consumer, as well as the industries that supply them with everything from food to fashion.

“According to Standard Chartered, there will be a five-fold increase in India’s per-capita income by 2030. However, despite a growing demand from India’s expanding consumerist middle-class, the Indian retail market suffers from major under-investment in its supply chains and back-end logistics. An upgrade of India’s retail infrastructure and supply chains will benefit everyone from consumers to local companies, including those in the unorganised retail sector.

“The reforms will also create fresh investment in the farming and food sector, which will dramatically bring down the burden of rising food prices and create a greater choice of consumer goods — and better service.”

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