Foreign direct investment (FDI) in India’s growing retail sector is looking more likely, according to the head of the world’s largest retailer, Wal-Mart.
Speaking in New Delhi this week after talks with Indian government officials, Wal-Mart president and chief executive Mike Duke said he saw progress in discussions to relax India’s tight regulations on foreign ownership of retail outlets, reported the AFP.
Indian regulations currently prohibit foreign retailers from owning multi-brand retail outlets that sell to the public, and restrict ownership of single-brand retail outlets to 51 per cent. Foreign companies are only allowed to own 100 per cent stakes in business-to-business wholesale stores.
"One hundred per cent FDI would be the `optimal` solution for all constituents and stakeholders in the retail sector,” said Mr Duke, adding that Wal-Mart respected that India would likely take a “calibrated opening” of the retail sector.
That calibrated approach was hinted at last week, with the revelation an internal committee set up by India’s Ministry of Finance was in favour of allowing FDI with an initial cap of 49 per cent foreign ownership in multi-brand retail, according to a Livemint report.
Mr Duke’s comments come ahead of a visit to India next month by US president Barack Obama, who is also expected to push for a relaxation of retail restrictions.
While Mr Duke said he had a “positive feeling” about the discussions, he stated he could not know the mind of the Indian government. “Whether or not it is a done deal is not for me to address,” he said.
Wal-Mart, which is currently working on expanding its Bharti Wal-Mart 50-50 wholesale cash-and-carry joint venture, has been spruiking the advantages of modern retail supply chains.
According to various industry figures, up to 40 per cent of India’s fresh produce rots before it gets to the market, a figure that poses a significant problem for a country concerned with food security and increasing consumption.
The company has also pledged to develop local sourcing of agricultural products for its current Bharti Wal-Mart joint venture, as well as any future direct retail outlets, reported ANI.
“We are already making a contribution to India’s agricultural sector by working with a large number of farmers in Punjab,” Mr Duke said. “I am pleased to announce that Bharti Wal-Mart would be directly sourcing from 35,000 small and medium farmers by 2015.”
Mr Duke said the company would provide farmers with skills and technology for crop management, in the hope farmers would see at least a 20 per cent rise in income levels.
Bharti Wal-Mart already operates two training centres in Delhi and Amritsar, and plan to open a third in Bangalore.
