Wal-Mart `Optimistic' India to Allow Foreign Retail Investment
Mike Duke, chief executive officer of Wal-Mart Stores
Beth Hall/Bloomberg
Mike Duke, chief executive officer of Wal-Mart Stores Inc.
Mike Duke, chief executive officer of Wal-Mart Stores Inc. Photographer: Beth Hall/Bloomberg
Wal-Mart Stores Inc. Chief Executive Officer Michael Duke said he is “optimistic” that overseas companies will be allowed to invest in India’s retail industry.
Wal-Mart, the world’s largest retailer, and rivals including Carrefour SA and Tesco Plc are pushing India’s government to allow foreign investment after the trade ministry invited views from the industry on removing the restriction. The government’s discussion paper said in July that allowing foreign investment in retail will lower prices and benefit farmers.
“The opening of dialogue the ministry has initiated is very productive, and I view that as progress,” Duke said at a press conference in New Delhi yesterday. Easing the rules on foreign investment in retail will help curb inflation and may lead to the creation of 3 million jobs in India, he said today.
India is the third most attractive retail market for global retailers among the thirty largest emerging markets, U.S. consulting group AT Kearney said in a June report. The growing middle class, expanding economy and increasingly brand-conscious consumers will help push retail sales up by 35 percent over the next three years, the consultant said.
Duke is in India, the world’s second-most populous nation, to meet with government officials and visit wholesale stores that Wal-Mart operates with New Delhi-based Bharti Enterprises Pvt. Indian laws, aimed at protecting the interests of small store owners, limit overseas investment to single-brand retail or wholesale operations.
‘Enormous’ Opportunities
Wal-Mart would invest more capital and build more stores if foreign investment is allowed in multi-brand retail in India, Duke said, without providing more details.
“The opportunities for foreign firms are enormous,” said Narayanan Ramaswamy, executive director at KPMG in India. “The retail demand in India is huge and next only to China, so there is considerable growth potential for these companies over the coming years.”
The Congress Party-led government has previously been rebuffed in its attempts to obtain political backing from its former Communist allies for plans to allow foreign retailers to invest in India.
“The fear in the big urban towns is that relaxing the laws will drive the mom-and-pop retailers out of business or at least curtail their margins severely,” said Apurva Shah, head of research at Prabhudas Lilladher Pvt. in Mumbai. “That is going to be the principal roadblock for the government to do anything.”
Bharti Partnership
Barred from opening retail stores in India on its own, Wal- Mart partnered with Bharti in August 2007. The two companies are jointly opening wholesale stores and building a supply-chain network.
Organized retail may create as many as 3 million jobs in the next five years in India, Duke said. Bharti Wal-Mart, the joint venture, aims to buy produce from 35,000 farmers by the end of 2015, and help increase their income by as much as 20 percent by purchasing directly and improving their efficiency.
In April, Bentonville, Arkansas-based Wal-Mart and Bharti opened a second wholesale store in the northern state of Punjab. Bharti-Walmart, an equal joint venture, plans to have as many as 15 such stores by the end of 2011.
“India is very important to Wal-Mart and that’s why we keep coming back and why we pay a great deal of attention to India,” Duke said yesterday.
Obama Visit
Wal-Mart declined 0.2 percent to $53.95 in New York Stock Exchange composite trading yesterday. The world’s largest listed company has gained 0.9 percent this year, compared with a 6.3 percent climb for the Standard and Poor’s 500 Index.
Duke’s trip to India comes ahead of President Barack Obama’s first state visit to the country. The U.S. president will address a conference sponsored by the U.S.-India Business Council Nov. 6 in Mumbai, India’s financial capital.
Obama is expected to bring the largest U.S. business delegation to India and the Obama administration will probably push for greater access for foreign retailers, KPMG’s Ramaswamy said.
“I would definitely think that the Obama delegation will be pushing for greater access, it is a very important part of the retailers’ expansion plans,” he said.
To contact the reporters on this story: Malavika Sharma in New Delhi at msharma52@bloomberg.net; Pratik Parija in New Delhi at pparija@bloomberg.net
To contact the editors responsible for this story: Sam Nagarajan at samnagarajan@bloomberg.net; Frank Longid at flongid@bloomberg.net
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