Reliance Retail.. shut ..

The new supermarket was slated as the shape of retail to come in globalising India. Now shutters covered its windows, staff meandered outside and customers picked final bargains before its closure.

The store, open just two months, was the latest to close after Uttar Pradesh told Reliance Industries to shut its supermarkets, citing law and order problems after protests from small traders and political activists.

"In the street markets it's not hygienic, their weights don't work and there's no air-conditioning," said V.P.S. Nanda, a stationery shop owner whose bags bulged with groceries in the fading minutes before the store's temporary closure.

"Everything is so convenient here," he said, pondering a while for the right phrase. "That's the word -- convenient."

The closure of 10 Reliance stores by Uttar Pradesh highlighted the choppy progress of India's modernisation, beset by political wobbles and fears for the livelihoods of millions of Indians who work in street markets or small shops.

Following Thursday's closure in the state capital Lucknow, authorities ordered the closure of more stores in Noida and Ghaziabad -- towns on New Delhi's outskirts that are symbols of a middle-class consumer boom -- because of security concerns.

The stores could be shut for up to 60 days as authorities look into law and order problems. A Reliance official, who asked to remain anonymous, said plans to inaugurate more supermarkets in the states had been suspended for now.

It was a blow for Reliance Retail, a subsidiary of top conglomerate Reliance Industries Ltd and which plans to spend $5.6 billion on hundreds of stores and already has more than 250 Reliance Fresh grocery stores.

The potential profits are huge. About 3 percent of India's market is organised retail, a tiny amount compared with other large economies.

India's $350 billion retail industry could double in size by 2015. Companies like Wal-Mart are also keen to enter the market even though foreign retailers are hampered by laws restricting multibrand retailers to cash-and-carry and franchise operations.

Wal-Mart Stores Inc. and Bharti Enterprises have signed a deal to set up wholesale outlets jointly, but the project has also seen protests.

Tesco and Carrefour have eyed the market but are waiting for changes in the investment law.

New supermarkets have sparked protests in other states, like Jharkhand, Madhya Pradesh and West Bengal.

Sonia Gandhi, head of the Congress party which heads a fractious centre-left coalition, has expressed caution about allowing foreign retailers into India.

POLITICS OVER RETAIL?

Some analysts said the closure, announced by Uttar Pradesh Chief Minister Mayawati, was dictated by fears of losing votes from traders and some farmers.

"It is clearly a populist, political move," said Raman Mangalorkar, a principal at consultancy AT Kearney. "It sends a very bad signal to investors."

Investors are worried that, while Uttar Pradesh is a poor state and not India's biggest market, it could spark a chain reaction among left-ruled states like Kerala and West Bengal.

There have also been reports of some states seeking to impose limits on the size and number of stores, which would crimp profits of retailers who need economies of scale.

"Foreign firms like to have clarity on policy and control of their operations, so they may hesitate to commit now," said Soumya Palchoudhuri, retail industry manager at Ernst & Young.

"The bigger question for them is really: how much of the magic is still there in India?" he said, echoing analysts who say the window for foreign retailers might soon close.

Via Reuters