By Anjana Pasricha
New Delhi
02 July 2006

 
Reliance Industries Chairman Mukesh Ambani addresses a press conference in Chandigarh, India
  
India's biggest conglomerate plans a massive investment in the country's fast-growing  retail sector. International investors are also looking for an opening into the Indian market.

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Reliance Industries' $5.6 billion investment will be used to open stores in 1,500 towns and cities. The network of supermarkets, hypermarkets and neighborhood convenience stores will sell everything from food and clothes to consumer durables.

The company says its will hire half a million people to staff the stores in the coming years. The first shops are expected to open by the end of the year.

The company says it wants to propel a retail revolution in a country where "mom-and-pop" stores dominate the shopping landscape. Modern retail operations, selling branded goods through department stores, account for a mere three percent of the $30 billion market.

Both domestic and overseas companies want to explore the potential created by the country's soaring economic growth and the purchasing power of an affluent middle class.

Raman Mangalorkar, with management consulting firm A.T. Kearney, says a recent survey revealed that India is at the peak of its attractiveness for retailers.

"We actually have rated India as the most attractive market," he said.  "this is the second year in a row we have rated India as the number one retail market in the world."

Overseas retailers do not have a presence in India because the government blocks most foreign investment in the sector. Brands such as Adidas and Marks and Spencer sell through franchisees, instead of their own shops.

But there is a move to slowly open up the sector. Earlier this year, the government began allowing retailers selling single brands such as Nike to own up to 51 percent of a store or chain. Business experts say that more restrictions on foreign investment will likely be relaxed in the coming year.

Mangalorkar says giant global retailers such as the American company Wal-Mart are eying the Indian market.

"There is a lot of interest in most of the major international players, they are pacing on the sidelines, building their strategic plans, and getting ready to enter as soon as the opportunity opens up," he added.

Market watchers say Reliance Industries has timed its investment to get a head start in the sector while protectionist rules keep out international companies.

For the time being, political opposition is holding back liberalizations, because communist parties fear that large foreign companies could force 12 million small shops out of business, leaving 40 million people without jobs.