beyondbrics

Walmart remains persona non grata on the subcontinent, but Ikea: India welcomes you.

The Congress Party-led government last month proposed revolutionary reform in the form of increased foreign direct investment in retail only to quickly drop the plan in the face of widespread protest.

But on Tuesday the cabinet quietly revived part of the programme – and opened India’s doors to single-brand retailers such as Ikea.

The government announced that foreign companies, including the likes of Adidas and Gucci as well as Ikea, would soon be able to invest 100 per cent in single-brand retail outlets and chains.

But the country will remain closed to supermarkets, with their multi-brand offerings, because they are seen as too much of a threat to India’s legions of family-owned stores.

Congress remains focused on what tends to be its primary concern: getting elected. Its leaders are thinking of little else but crucial state elections next month in Uttar Pradesh, India’s largest state.

Given the glee with which the opposition Bharatiya Janata Party – and even members of the ruling coalition – took to protesting against FDI in multi-brand retail on the grounds that it would destroy millions of mom-and-pop store owners, prime minister Manmohan Singh was perhaps wise to say he would delay pushing for that reform until after the elections.

Gven that FDI for the 6 months ending in November 2011 was up 62.8 per cent to $22.83bn, according to the Economic Times on Tuesday, there’s clearly appetite to invest in Asia’s third-largest economy.

But after the disastrous winter session of parliament, which had some wondering whether the ruling coalition wasn’t a lame duck just halfway through its term, and the Congress party’s focus on electioneering, there are concerns that investors might start feeling unwanted.  Allowing in single-brand retail seems a reasonable compromise.