BRITISH retailers could be free to set up shop in India for the first time from this summer when the Government moves to relax stringent rules on foreign retail investment, The Times has learnt.

The Indian Government, which has been discussing an easing of the laws with global retailers such as Tesco and Wal-Mart, signalled for the first time yesterday that it was prepared to allow some foreign retailers to enter the country freely. At present India does not allow overseas companies to set up shop without a local joint venture partner.

Ajay Dua, India’s top investment policy official, said there was likely to be an announcement on a shift in policy in May. That would involve “a degree of opening up to foreign direct investment.” Although Mr Dua declined to comment further, it is understood that the policy change will be gradual, with the first relaxation applying only to luxury goods companies such as Prada or Burberry, which will be allowed to set up shop in affluent centres.

That is because 97 per cent of all Indian retailing is conducted through market stores, or street outlets, known as unorganised retail. Most of the rest of India’s goods are sold through Western-style retailers based in shopping malls, or organised retail. There is no such thing as high street retailing.

Kamal Nath, Commerce & Industry Minister, said: “Retail is a contentious issue in India. We want to ensure that foreign direct investment does not rock the boat, as it has done in countries like Singapore. We are speaking to leading world retailers and working on a model that is incremental.”

The Indian Government is reluctant to allow in mass-market foreign retailers because they could put many of the hundreds of millions of people who rely on retailing for their livelihoods out of business.

India has a population of 1.1 billion, with some 40 per cent living below the poverty line. Many shopkeepers would not be likely to get jobs in the foreign-owned retailers, which would require a higher level of training and education, Mr Dua said.

He was speaking to a British business delegation, led by the Indo British Partnership Network, set up to foster trade between the two countries. Ian Pearson, the Trade Minister was also present.

One Indian analyst said the announcement amounted to “a very significant step” that would almost certainly lead to far greater deregulation.

The Indian retail market grew by about 7.5 per cent last year, with the value of sales through shopping malls rising by 30 per cent.

The number of shopping malls, which were virtually non-existent five years ago, now stands at about 300. Many more are in the pipeline, potentially creating huge opportunities for foreign retailers.

At the moment only a handful of foreign retailers, such as Marks & Spencer, Benetton Dior and Lacoste, are allowed to operate in India, and then only through franchised outlets.

But many more are keen to enter the market, with Debenhams, Mothercare and Clarks already planning to open stores via franchisees this year. Next is also thought to be negotiating a franchise agreement with Planet Sports, the company that operates stores for Debenhams and Marks & Spencer in India.

Some retailers see India as a bigger opportunity than China because of its fast-growing economy and relative ease of entry for British companies.

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