Political party expected to lead India's next government says it would ban foreign supermarkets from US$500B retail sector, a potential new setback to global chains such as Wal-Mart, Carrefour; five-week election began April 7

Cindy Allen

MUMBAi , April 7, 2014 (Thomson Reuters Corp.) – The political party expected to lead India's next government confirmed on Monday it would ban foreign supermarkets from the $500 billion retail sector, a move that would deal a fresh setback to global chains such as Wal-Mart and Carrefour.

The Bharatiya Janata Party (BJP), which has in recent years opposed investment by foreign firms into multi-brand retail, made the announcement in its election manifesto, which it unveiled in New Delhi earlier.

If elected, the BJP said it would welcome foreign direct investment in all sectors that create local jobs, except for supermarkets.

It is not clear, however, whether the BJP, which is forecast to win the most parliamentary seats in a five-week election that started on Monday, would follow through on the ban. The BJP is likely to need coalition partners to form a government.

"Pre-election rhetoric and decision making post-election are two different things," said a person who worked on the manifesto but who declined to be named because he is not authorised to speak to the media.

India's federal government gave foreign supermarket chains the green light in September 2012, but then left if up to individual states to enact the legislation. Many didn't, fearing a backlash from politically powerful local traders, and this regulatory uncertainty has put off many global chains.

The BJP and its prime ministerial candidate, Narendra Modi, are perceived to be the more business-friendly of India's two national political parties, but it counts among its key supporters the millions of small traders who worry about being run out of business by global chains.

So far, only Britain's Tesco PLC has made an investment in India -- last month, it sealed a $140 million joint venture with the Tata Group's Trent Ltd to operate 12 stores in southern and western India.

Tesco's spokesman in India was not immediately available for comment on the BJP's manifesto and did not respond to an email sent by Reuters. An official at Trent, who declined to be named as he was not authorised to speak to the media, said the BJP's manifesto could cast doubts about the fate of the joint venture.

Asked to comment about the manifesto, a senior official at Wal-Mart in India said he hoped the BJP would be open to discussing their stance.

"We are interested in knowing if this a decision set in stone or if they are willing to have discussions around it," said the official, who declined to be identified because he was not authorised to speak to the media.

"If they are not open to talking then it's really very unfortunate," he said.

Wal-Mart did not respond to an email sent by Reuters.

If implemented, the BJP's ban on foreign supermarkets may spur further consolidation in Indian retail, where investors have grown impatient with years of losses at most of the country's supermarket chains, analysts said.

"Now we can actually expect conversations on valuations because some companies will look at selling out as it will simply be too difficult to run the business without external funding," said Rachna Nath, who heads the retail and consumer practice at consultants PWC. (Additional reporting by Frank Jack Daniel in NEW DELHI; Editing by Tony Munroe and Miral Fahmy)

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