For more than a year, India received no interest from abroad after new regulations allowing for foreign direct investment (FDI) in multi-brand segment retailers, until Britain's Tesco made the first move this week.

Trevor Masters

On Wednesday the British retailer applied to India’s Foreign Investment Promotion Board to open multi-brand stores in the country, which Tesco CEO Trevor Masters described as "one of the fastest growing economies in the world".

Tesco PLC (L: TSCO) is proposing to invest US$110 million to set up a 50-50 partnership with India’s Tata group-owned Trent Hypermarket Limited. Back in 2008, Tesco signed wholesale and franchise agreements with Tata to supply around 80 per cent of the goods in 16 Star Bazaar and Star Daily stores located in parts of southern and western India.

If the application is approved, Tesco would become the first global retailer to enter the country; a prospect that is exciting Indian government ministers who hope this inaugural application will spark more investment proposals from other global leaders.

One of the most exciting prospects to come from the proposed partnership would be Tesco’s involvement with the local produce market in India. The CEO said working with Tata for five years had provided the retailer with a wealth of knowledge about the local market and Tesco had already established "great relationships" with local suppliers and farmers that it was keen to build on in the future.

"We believe combining our global retail expertise and Tata’s unrivalled understanding of the Indian market has tremendous potential and we’re excited to be exploring ways to do more together," Masters said in a statement.

"With a population of 1.2 billion people and an enormous range of economic and social classes, languages, religions, cultures and geographies, India is one of the most diverse markets in the world.

"This presents its own challenges but it’s also what makes India such an exciting opportunity. The incomes and expectations of consumers have changed dramatically in the last five years and will continue to do so."

The application process is expected to take some time before a final decision is reached.

"If it [the application] were successful, it could open the way to Tesco investing directly and forming a partnership from our existing relationship with the Tata Group.

"That partnership would mean working closely every day to bring more of the benefits and capabilities we have developed over decades to Indian consumers, manufacturers and the supply chain."

www.freshfruitportal.com