Indian govt warms to Wal-Mart's retail push
Indian Minister for Food Processing Industries Subodh Kant Sahai (C), President and CEO, Walmart Stores Inc, Mike Duke (L) and Federation of Indian Chambers of Commerce and Industry (FICCI) President and Vice Chairman of Bharti Telecommunication and Airtel mobile group Rajan Bharti Mittal shake hands during an interactive meeting organised by FICCI in New Delhi yesterday. India's government appears to be moving closer to opening up the nation's vast retail sector to foreign investors. Photo: AFP
The Indian government sounded a positive note on Tuesday on opening up to foreign direct investment in the massive but politically sensitive multi-brand retail sector by global players like Wal-Mart and Carrefour.
Food Processing Minister Subodh Kant Sahai backed calls by Wal-Mart, the world's largest retailer, to open up parts of the tightly regulated $450 billion retail sector and said this may happen next year.
"I am in favour of it because this will give market-driven farming to farmers," Sahai told reporters at an event attended by visiting Wal-Mart Stores Chief Executive Mike Duke.
India's retail sector is largely closed to foreign firms and favours small mom and pop stores, with 51 percent of foreign direct investment allowed only in the single-brand retail sector. Multi-brand retail is restricted to cash-and-carry or wholesale outlets.
Opening up the sector would ease massive supply bottlenecks that have helped keep inflation stubbornly high.
"It is very much on (the) agenda," Sahai said referring to opening up the multi-brand retail sector to foreign investment. "Let's see, by next year," Sahai said, when asked about the time frame for such a move.
Still, it is not the first time the government has hinted at possibly relaxing the rules. Over the past few years the government has moving forward on reforms only to backtrack in the face of local opposition.
Wal-Mart, in partnership with India's top telecoms group Bharti Enterprise, operates four cash-and-carry outlets in India.
India, which along with China is leading annual economic growth among major economies, is increasingly a hot investment destination for global companies keen to tap into the massive, decentralised yet heavily regulated market.
POLITICAL MINEFIELD
An estimated 40 percent of India's farm produce spoils before reaching consumers -- an alarming statistic in a country where millions go hungry. Cold storage is scarce and expensive.
With mom-and-pop stores accounting for over 90 percent of domestic trade, the issue remains a political minefield for a ruling Congress party fearful of losing its populist appeal through potential job losses and protests from farmers.
Many local retailers still oppose relaxing restrictions for fear that global titans will drive local stores out of business.
But Prime Minister Manmohan Singh's government has begun to speak more positively recently on relaxing the rules, hoping the benefits of such a move -- creating thousands of jobs and reining in inflation by curbing waste -- would douse political opposition.
India's commerce and industry ministry in July released a discussion paper on opening the sector, but it steered clear of suggesting changes to the existing investment cap.
Singh's political boss and Congress party chief Sonia Gandhi has so far publicly been reluctant to embrace the changes, part of a general slow pace of reforms that has frustrated many foreign and local investors.
Wal-Mart's Duke told reporters on Monday he was getting a "very positive" feeling from officials about further opening up the sector to FDI. The company has long sought greater access to the Indian market.
Duke said on Tuesday that Wal-Mart would step up direct sourcing in India from farmers.
"We are currently buying fresh products direct from over 600 farmers and are working with them to increase their yields and best practices," Duke said.
"I am pleased to announce a new goal to buy directly from 35,000 small and medium farmers in India by the end of 2015."
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