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India defends rules for foreign retailers

Published on NewsOK Modified: October 10, 2013 at 3:22 pm •  Published: October 10, 2013

WASHINGTON (AP) — India defended Thursday government regulations designed to protect local businesses that have prompted U.S. retail giant Wal-Mart to hold back on opening superstores there.

Finance Minister Palaniappan Chidambaram told a Washington think tank that the rules weren't too restrictive. He said he remained confident that one or two multi-brand retailers would enter the Indian market in the fiscal year ending March 2014. He did not name them.

In a politically sensitive move, India last year gave the green light for international companies to open multibrand retail stores, but to allay concerns about the impact on small traders and family-run shops, those companies would have to obtain 30 percent of their products from local small and medium-sized businesses.

So far, no large foreign chains have taken the plunge. On Wednesday, Wal-Mart Stores said the local-sourcing regulations mean it cannot move forward with its plans to expand into retail in India — a blow to the government's efforts to attract foreign investment to a market of 1.2 billion people. Wal-Mart already runs a wholesaling joint venture in India.

Chidambaram alluded to the political sensitivities in his comments at the Carnegie Endowment for International Peace.

"I sincerely hope that an investor will look at the practical difficulties that a policymaker has in India and accept policies as they are made and as they are, rather than hope for the ideal policy," he said, without mentioning a specific company.

He said experiences in the auto and defense sectors, where foreign companies had teamed up with local companies and helped build their local production capacities, showed that requirements on local content could be satisfied.

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