In sweeping economic reforms passed Friday, India’s Central Government agreed to allow foreign investment in multi-brand retailers. The decision was made in response to falling growth rates in the country, and reflects an effort on the part of lawmakers to help boost the economy. The country has a large retail industry which will make it an appealing investment for foreign firms, who for the first time can hold a majority stake.
Retailers like Wal-Mart can now invest in the market by partnering with local companies, but own the majority of their investment. According to India’s minister for commerce and industry Anand Sharma, “the objective of the policy was to attract investment, create local manufacturing and employment.” Other lawmakers, however, opposed the bill and argued that it would hurt smaller, local retailers.
The government has faced division and struggled to pass reforms as the economy has slipped further, so Friday’s decision brought hope to many. Also worth noting is the lawmakers’s decision to let states choose whether big foreign retailers can open shop in their jurisdiction. This means that theoretically, if some allow and some refuse, a side-by-side comparison can be used in the future to analyze the effectiveness of these reforms.