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European Retail Chains Set to Enter India

Several European retail chains are finalizing plans to enter India, estimated to be one of the world's fastest growing retail markets. Global retailers want to get a foothold in the Indian market although government rules do not yet permit foreign direct investment in the retail sector. From New Delhi, Anjana Pasricha reports.

The world's second biggest retailer - France's Carrefour - says it is choosing an Indian partner to open cash and carry outlets in India by 2009.

India does not allow foreign retailers to set up shop directly if they sell multiple brands - but they can tie up with local partners to sell their goods.

French furniture maker Gautier says it will open outlets to sell furniture for children by the year-end. Britain's Marks and Spencer, which already operates several stores in the country, is also looking for Indian partners to expand its presence in the country.

European retailers are not the only ones eyeing the Indian market. Earlier this year, U.S.-based Wal-Mart teamed up with a local company in a joint venture to set up wholesale stores.

Market consultants say global retailers are tying up with domestic partners to gain a foothold in India's $30 billion retail market.

Rahul Sinha, from the consulting firm PriceWaterhouse Coopers, says the Indian retail market is expected to grow at 30 percent annually.

"The second important thing to understand is that in their markets, wherever they are operating, growth rates are saturated and obviously they need to grow the way they had grown earlier they need to look at new markets, and India is to that extent very attractive," said Sinha.

In India, economic growth of nine percent annually is fueling the growth of the middle class.

More than half the one billion people in India are under 25 years old, and aspire to higher living standards.

Foreign retailers do not want to be left behind in the race to grab a share of this lucrative market.

Large domestic companies such as Reliance have already made huge investments in the retail sector, and opened dozens of stores across India.

However, the Indian retail market is not providing easy growth for everybody - even for domestic players.

Small shop owners and farmers are putting up stiff opposition to large retail chains, which they fear will put them out of business. Small retailers control 97 percent of the retail business.

In recent months, they have held several street protests and demonstrations.

Analysts say opposition from this section will make it difficult for the government to completely open the retail sector to foreign investment - and global retailers will have to be content with working with Indian partners for some time to come.