India opens possibilities for Wal-Mart

The government agrees to allow foreign companies to own up to 51% of supermarkets, saying the move will create jobs and spur investment.

By Kim Peterson Nov 25, 2011 12:53PM
Image: India (© Donald Edwards/age fotostock)Wal-Mart (WMT) and other global retailers have long wanted a shot at India and its $500 billion retail market. Now, they may get their chance.

The Indian government this week voted to allow foreign companies to own up to a 51% stake in supermarkets. Experts said this could open the way for Wal-Mart, Britain's Tesco (TESO) and France's Carrefour (CRRFY) to begin expanding throughout the populous continent.

But Wal-Mart isn't getting a welcome from everyone. "If Wal-Mart tries to open its mall anywhere, I will burn it myself," said Uma Bharti, a former state chief minister who opposes the plan, according to Reuters. Smaller retailers, worried about the likes of Wal-Mart forcing them out of business, are reportedly planning to protest the move next week.

The head of Wal-Mart India was delighted by the government's decision, saying it will "redefine the way consumers shop in India, but more importantly, the way supply chains in India run."

Here's one example of the poor supply chain: About 40% of produce in the country rots before it can be sold because the infrastructure is bad and there aren't enough cold-storage facilities, Bloomberg reports. Wal-Mart has the resources -- and now the financial motivation -- to change that.

Wal-Mart shares rose more than 1% Friday to $57.28 in morning trading.

The government said its decision could create 10 million new jobs in the next few years. "We are sitting on a time bomb in terms of employment," said economist Jayati Ghosh, according to Reuters. The new rules also allow retailers with single brands, such as Sweden's IKEA, to be 100% foreign-owned.

Wal-Mart already has a toehold in India. The government already allows foreign companies to own wholesale stores, and Wal-Mart has set up 14 of those in a joint venture with an Indian firm.

"Foreign retailers must be licking their lips at this opportunity," the executive director at KPMG India, which advises retail companies, told Bloomberg. "It has to be one of the biggest opportunities in the world right now."

Tags: WMT
2Comments
Nov 28, 2011 4:54AM
avatar

Dear MSN, Article is good and really informative, but I am really annoyed with you as because you have publishes an image of India without J&K.  J&K is the part of India, we will not allow anyone steal the part of our mother country - India... Jai Hind!!

Shameer

Nov 28, 2011 5:48AM
avatar

India beware,... Wal Mart is sneaky, they have this way of taking advantage of both employees and customers. The workders don't get much in a benefit package, except for higher prices. Nor do they sell the best quality vegtables, at sometimes higer prices.

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