UK retailers poised to enter Indian market

New Delhi: Two of the UK’s largest food retailers, Tesco and Waitrose could move into India if the government lifts foreign direct investment restrictions. In a television interview on India’s CNBC-TV18 business channel, Jyotiraditya Scindia said he was concerned about a 35% decline in foreign direct investment in 2010 and that he believed lifting restrictions in sectors such as multi-brand retail and defence could reverse the fall.

His comments follow the visit to New Delhi last week by UK government’s business secretary Vince Cable to lobby India’s commerce minister, Anand Sharma, to further relax restrictions on foreign direct investment in higher education, defence, financial services and the retail sectors. Britain has been disadvantaged in its attempt to capitalise on India’s breakneck 9% annual growth because of heavy restrictions on investment in sectors where British business is strong.

Cable told Indian ministers its current food crisis, in which shortages of supply have sent prices of staples such onions and grains soaring, could have been minimised if supermarket giants like Tesco had been able to set up in India. Tesco is eying expansion into India. The British retailer has an alliance with Tata Group, one of India’s largest conglomerates, to help open a new hypermarket chain, warehousing and supply system.

Outgoing Tesco Chief Executive Sir Terry Leahy, who is attending the World Economic Forum in Davos, said he favored the creation of new supply chains that are sustainable to address needed changes in models of mass consumption, particularly for large consumer markets such as India and China. Leahy disclosed that after he retires from Tesco, he will be involved in private investment in the UK and Asia, which he conceded is a vital market for the British retailer.

The Indian government wants foreign investment to establish new cold chain logistics systems and warehousing facilities to dramatically staunch the loss of up to 40% of its food produce that rots every year before it reaches the market. More than 17m tonnes of food grain was left to rot last year because there was no space to store it in suitable warehouses – a loss of $3.2bn.