Britain’s Tesco Plc is set to become the first foreign retail chain to set up a supermarket in India with the Foreign Investment Promotion Board (FIPB) —the nodal agency to vet overseas investment proposals—approving its proposal for partnership with the Tata Group’s Trent Hypermarket Ltd (THL) with an initial investment of $110 million (about Rs 675 crore).
Tesco and THL had applied to the FIPB for setting up a 50:50 joint venture to open super-markets in India.
The decision is likely to bring cheer to the government, which is battling to attract investment amid perceptions of policy paralysis, and help the economy climb out of a decade-low slowdown in an election year.
Economic affairs secretary Arvind Mayaram confirmed that Tesco’s proposal had been approved.
Tesco’s decision to invest in India is seen as a vote of confidence in an economy that grew at its slowest pace in a decade in 2012-13 and is struggling to attract foreign investors.
The move comes more than a year after the government, in a politically-sensitive move, eased norms to allow foreign direct investment (FDI) of up to 51% in mutli-brand retail.
The venture, which plans to set up the first of these stores in Maharashtra and Karnataka, will sell a range of goods including most food products, wine and liquor, textiles and garments, footwear, crockery, furniture, electronic equipments, jewellery and books and magazines.
Tesco already has a franchise agreement to provide support to Trent’s Star Bazaar that currently operates 16 stores across the southern and western regions of India.
Recently, world’s largest retailer Wal-Mart Stores Inc had pulled out of its six-year-old joint venture with Sunil Mittal-led Bharti Enterprises, seemingly on grounds of restrictive rules.
The principal Opposition party the BJP, the Left and Mamata Banerjee-led Trinamool Congress are opposed to allowing any FDI in the retail sector, arguing that it would put the livelihood of neighbourhood grocery stores and street vendors at risk.