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Tesco supermarket's Indian investment plan gets green light in India Tesco supermarket's Indian investment plan gets green light in India
(about 3 hours later)
India's foreign investment regulator has approved a $110m (£67m) investment plan by Tesco, formally paving the way for the British retailer to venture into Asia's third-largest economy.India's foreign investment regulator has approved a $110m (£67m) investment plan by Tesco, formally paving the way for the British retailer to venture into Asia's third-largest economy.
Tesco this month took the initial steps towards becoming the first foreign company to set up a chain of supermarkets in India's $500bn retail sector after announcing it had applied to buy a 50% stake in Tata Group's Trent Hypermarket. Tesco has taken the initial steps towards becoming the first foreign company to set up a chain of supermarkets in India's $500bn retail sector after announcing it had applied to buy a 50% stake in Tata Group's Trent Hypermarket.
The deal was widely expected to be cleared without much political opposition, thanks to Tesco's low-profile approach and its decision to expand at a slow pace, consultants said.The deal was widely expected to be cleared without much political opposition, thanks to Tesco's low-profile approach and its decision to expand at a slow pace, consultants said.
The Foreign Investment Promotion Board (FIPB) also approved a proposal by the British telecoms group Vodafone to take full ownership of its Indian business in a $1.6bn deal. That proposal, however, needs final approval from the Indian cabinet. The Foreign Investment Promotion Board also approved a proposal by Vodafone to take full ownership of its Indian business in a $1.6bn deal. That proposal needs final approval from the Indian cabinet.
The economic affairs secretary, Arvind Mayaram, told reporters Tesco's and Vodafone's proposals had been approved.The economic affairs secretary, Arvind Mayaram, told reporters Tesco's and Vodafone's proposals had been approved.
Tesco's decision to invest in India is seen as a vote of confidence in an economy that grew at its slowest pace in a decade in the past fiscal year, and which is struggling to attract foreign investors.Tesco's decision to invest in India is seen as a vote of confidence in an economy that grew at its slowest pace in a decade in the past fiscal year, and which is struggling to attract foreign investors.
The venture also provides a boost for the Indian government after its decision to open up the supermarket sector in September 2012 received a muted response from overseas retailers put off by political opposition and ambiguous rules on foreign participation. The venture also provides a boost for the Indian government after its decision to open up the supermarket sector in September 2012 received a muted response from overseas retailers, put off by political opposition and ambiguous rules on foreign participation.
A senior Tesco official, who spoke on condition of anonymity, told Reuters it had taken months of arm-twisting and assurances by the government to persuade the company to take the plunge. A senior Tesco official, who spoke on condition of anonymity, told Reuters it had taken months of arm twisting and assurances by the government to persuade the company to take the plunge.
In October the world's biggest retailer, Walmart, called off a joint venture with India's Bharti Enterprises, citing unfriendly regulations. In October the world's biggest retailer, Walmart, called off a joint venture with India's Bharti Enterprises, citing unfriendly regulations.
Tesco has had a franchise agreement to provide support to Trent's Star Bazaar supermarket chain since 2008, but is now expected to open three or four stores a year under a slow expansion plan designed to comply with sourcing regulations.Tesco has had a franchise agreement to provide support to Trent's Star Bazaar supermarket chain since 2008, but is now expected to open three or four stores a year under a slow expansion plan designed to comply with sourcing regulations.
Tesco's Indian investment follows declining third-quarter sales in all nine of its continuing overseas markets for the second consecutive quarter.Tesco's Indian investment follows declining third-quarter sales in all nine of its continuing overseas markets for the second consecutive quarter.
The world's third biggest retailer, which makes about two thirds of its revenue in Britain, is currently in the middle of a $1.6bn plan to turn its fortunes around.The world's third biggest retailer, which makes about two thirds of its revenue in Britain, is currently in the middle of a $1.6bn plan to turn its fortunes around.
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