New Delhi, Aug. 4: Global giants Walmart, Tesco and Carrefour are unlikely to enter the $500-billion domestic retail market dominated by small stores following the relaxation in rules last week, analysts said.

Major players have welcomed the easing of rules, but analysts are sceptical of an immediate inflow of investments. The government has eased the mandatory sourcing rules from small players and back-end infrastructure requirements, while allowing entry into more cities.

Walmart is “optimistic” about the opportunity, while Tesco is reviewing the changes in rules.

“We appreciate the government’s willingness to consider our requests for clarity on conditions contained in the new FDI policy,” a spokesperson for Walmart said.

A Tesco spokesperson said the company “welcomed” the proposed changes in the policy and was in the “process of reviewing the conditions”.

However, analysts said the revision in rules partly addressed the concerns of retailers a majority of whom were likely to wait for the outcome of the general election next year before taking a decision.

“The news could have been better, but it is a step forward. Non-food sectors have not been touched. Electronics, watches and high fashion are products India does not make, and they cannot be done in small-scale industries,” Pinaki Ranjan Mishra, a retail analyst with Ernst & Young, said.

Analysts said foreign retailers feared the next government might impose additional conditions on them, making it tough to do business.

Another analyst said back-end investment changes might help major foreign supermarkets such as Walmart, Carrefour and Tesco, but not the entire retail sector.

“What about foreign electronics, clothing and pharmaceutical companies? These cannot, and they don’t need to, invest $50 million in back-end infrastructure. Is the policy only for big foreign retailers, or for the sector as a whole?” the analyst said.

Walmart is yet to announce the contours of its partnership with the Bharti group, with which it has a 50-50 joint venture in the wholesale business.

French group Carrefour has not identified an Indian partner, and the UK’s Tesco, which is in a franchise tie-up with the Tata group, also need to rejig the pact.

This wait-and-watch mode is the fallout of the government’s decision to keep intact the FDI limit at 49 per cent and not raise it to 74 per cent, which was proposed by a committee headed by economic affairs secretary Arvind Mayaram.

“This is an enabling retail policy bringing in more clarity and space for investors to invest in the country,” commerce minister Anand Sharma said after the cabinet meeting on the sops.

Kumar Rajagopalan, chief executive officer of the Retailers Association of India, said, “The central government is showing really positive intentions. The state governments now have to go forward and invite the companies to come and invest.”

wait & watch

• MNC retailers waiting for the outcome of next year’s elections
• Retailers fear the next government will impose additional conditions
• Retailers such as Watmart, Tesco have yet to firm up their organisation structure for multi-brand retail
• Clarity missing in multi-brand retail segments such as luxury goods, pharma and watches
• Retailers expected FDI limit to go up to 74%