The move is designed to trim costs for the world’s third largest retailer and develop local sourcing expertise in preparation for opening stories in India, according to a report in the Economic Times.
“Fruits, marine, rice would be a few of the things we would be exploring,” said a spokesperson for Tesco, which already targets a reported 7% of its international sourcing from India.
The spokesperson added that the move would bring new opportunities for suppliers of food and other goods in India.
Industry experts told the Indian newspaper that having a local subsidiary will help Tesco build back-end operations and negotiation clout among suppliers.
The imminent decision to enter the country’s estimated $400bn retail market will also be influenced by the furore over local sourcing regulations that the Indian Government implemented this year as it eased restrictions to allow international retailers like Wal-Mart and IKEA to open stores in the country.
While India has long allowed overseas ownerships in wholesale companies that are only allowed to sell to retailers and businesses, it was only in the last month that the parliament gave the green light for foreign supermarkets to invest in India.
Tesco earlier this year said it plans to source products with a retail value of £370m from India in the 12 months ending February 2013. As the retailer builds plans for India following an ailing effort to break into the US market, that volume is expected to increase significantly with the arrival of the new sourcing arm.
