When Walmart Came to Town in India

Global retailers watch Wal-Mart's entry into India

9 August 2007

Mumbai: Wal-Mart Stores Inc's final entry into India after a long delay may fuel intense opposition to foreign retailers, forcing the government to move even more cautiously and slowing the ambitions of other incomers.

Protests against Wal-Mart and even newly-opened stores by India's Reliance Industries Ltd. are a lightning rod for Indians fearful of modern corporate retail and its impact on family-run stores, as well as for politicians with an eye on national elections in 2009.

And they have given foreign retailers who want a bite at India's $350 billion retail pie pause for thought.

Foreign companies entering the Indian market have struggled with a restrictive investment policy which limits their ownership in certain sectors like retail, banking and aviation.

Even before Monday's Wal-Mart deal with Bharti Enterprises was announced, protests were planned by hawkers, farmers and trade unions against the "back-door entry of Wal-Mart", a campaign they say is modelled on the "Quit India" call against the British.

"India is too big a market to ignore, so I expect continued and increased interest from foreign retailers, but I do not expect the floodgates to open," said Manoj Ladwa, chief executive of MLS Chase Solicitors in London.

"What foreign retailers need is for the government to set out a clear process towards further liberalisation. It's not so much the pace, as the direction that needs to be properly defined."

Wal-Mart and Bharti Enterprises said on Monday they would form an equal joint venture for cash-and-carry, or wholesale, and back-end supply chain management, more than eight months after Bharti first said it would partner the world's biggest retailer.

Wal-Mart, which plans to significantly step up its sourcing of locally-made goods, stressed the venture's investments in the supply-chain will benefit farmers and small manufacturers.

But Carrefour and Tesco have shelved their plans until there is greater clarity on policy, and Wal-Mart's entry is not going to convince them to rush in now.

"They are probably waiting to see how Wal-Mart does, how it handles the opposition, and for some of that to die down," said said Umesh Madhavan, an analyst at Euromonitor in Singapore.

"The opposition is not going to die soon as it's become a big political issue. In fact, there's more opposition now, and I don't see rules being relaxed at least for another couple of years, with national elections coming up," he said.