NEW DELHI (AFP) – India on Thursday relaxed foreign investment rules in the lucrative retail sector, the commerce minister said, in a renewed reforms push aimed at wooing global supermarket chains.
Premier Manmohan Singh's government allowed foreign supermarkets to establish 51-percent joint ventures in the country in September 2012, but experts cautioned that restrictive conditions would deter retailers from investing.
Commerce minister Anand Sharma said foreign retailers will be allowed to invest 50 percent of an initial mandatory investment of $100 million to set up "backend infrastructure" within three years, but the government would not insist on further such investments.
Sharma added that the cabinet had also decided to overturn an earlier rule that only allowed foreign retailers to set up shop in cities with a population of at least one million people.
Several multi-brand retailers including Walmart, Tesco and Carrefour have expressed interest in India's huge consumer market but have run shy since September's announcement, citing difficult investment conditions.
India's once-galloping economy has slowed sharply in recent months and the embattled Congress-led government is keen to revive growth before facing voters in a general election that must be held by May 2014.
Thursday's cabinet meeting also gave clearance to pro-market measures approved partially last month, including raising the ceiling on FDI in the telecom sector from 74 percent to 100 percent.
The cabinet abolished the need for government approval for up to 49 percent foreign investment in single-brand retail and petroleum refining.
It also decided it would sell a 10 percent stake in the country's biggest refiner, Indian Oil Corporation (IOC), the Press Trust of India reported, citing unnamed sources.
Foreign direct investment (FDI) in India is seen as vital to reducing the deficit and spurring growth, as well as improving the country's creaking infrastructure and providing jobs for its millions of young people.
Economists say India needs to cut red tape, slash inflation, reduce widespread corruption and speed up project approvals to lure investors.