28 November 2011 – The Walmart ‘scare’ is something that appears to have affected India with a decision by the country to open its retail business to foreign investors.
However, as the Wall Street Journal reports, the decision under new Indian regulations has generated a “firestorm of protest”. Indian businesses are afraid of the Walmarts and other big-box stores entering the local business arena.
As the WSJ reports, under new regulations, retail giants such as Walmart, Carrefour and Tesco, long barred from selling directly to Indian consumers, will now be permitted to own a majority 51% stake in joint operations with a local partner.
So-called single brand retailers, the likes of Apple and Ikea, can own 100% of their stores, up from 51% previously. Both kinds of stores will have to source nearly a third of their goods from small and medium sized Indian suppliers as well as confine their operations to 53-odd cities with a population over one million.
After nearly a decade of debating the issue threadbare on op-ed pages and in TV studios, Indians should by now recognize the economic benefits of foreign direct investment in retail. Large foreign retailers will reduce waste by creating modern cold storage and supply chains for fruits and vegetables. They will increase choice and lower prices by cutting out middlemen, who often gouge the consumer with mark-ups above the global average. Commerce and Industry Minister Anand Sharma expects fresh investment to generate 10 million new jobs over three years, about 5-6 million of them in logistics alone.
Against this backdrop, the average resident of New York, Shanghai or Jakarta may wonder what all the fuss is about. Why should Indians care whether their televisions and tomatoes come from a store owned by a German or a Gujarati?