The Indian government has approved a policy amendment allowing foreign investment in its retail sector – a move that could open up the world’s largest dairy market to Western brands, an analyst has claimed.
Last week, the country’s Cabinet approved an amendment to the existing policy on Foreign Direct Investment (FDI) in Single-Brand Product Retail Trading in an effort to revive the country’s currently sluggish economy.
Through this amendment, international retailers will be able to buy up to a 51% stake in India-based multi-brand retailers.
The approval has been welcomed by foreign retailers, but has met opposition from a number of Indian politicians and small business owners in the country.
Rabobank dairy sector analyst, Kevin Bellamy told DairyReporter.com that the Cabinet decision represents the first step towards the expanded presence of Western, established dairy brands in the Indian market.
Western dairy demand
“Companies like Wal-Mart and Tesco will be able to expand into an area where they haven’t been able to in the past because of this decision,” said Bellamy.
“There is massive demand for Western, branded dairy products in the Indian retail market and this move has made the Indian supply chain more accessible to dairy brands.”
“India already has the biggest market for dairy products in the world. There has been a Westernisation of diets in the country in recent years, and as a result demand for Western-brand dairy products has increased.”
“People in the country are going to be looking to purchase these products.”
A number of Western dairy firms already have an established presence in the India dairy market; including Swiss food and beverage giant Nestlé and US food firm Schreiber Foods. But through the Cabinet decision, Bellamy believes Indian could "become an area of huge growth for global dairy firms."
“This is the first step towards introducing outside dairy products into the Indian dairy market,” he added.
Following the Cabinet decision, Indian Prime Minister Dr Manmohan Singh said the policy amendment would make India “a more attractive destination for foreign investment.”
“I believe that these steps will help strengthen our growth process and generate employment in these difficult times,” he added.
The move has been welcomed by US retail giant Wal-Mart, which owns UK-based retailer Asda.
“We believe that allowing 51% foreign direct investment in mutli-brand retail is an important first step for the Government of India to further open this sector,” said a statement from the firm.