Indian politicians are at it again. After passing a complicated law that allowed multinational retailers to invest directly in India back in September, this week could see the government make changes that will simplify market entry for companies like Walmart.
The current policy — passed last year — allows 51% foreign direct investment in the multi-brand retail sector. Foreigners had to come to town with an Indian partner. But the law is subject to stiff clauses, including a large minimum investment in back-end infrastructure and a mandatory 30% sourcing from small and medium enterprises. The government felt it had to placate smaller business owners who had complained that bringing the multinationals onto their playing field would kick them to the sidelines and make them all Walmart greeters.
Now, there is change in the air in India yet again.
The finance ministry proposed that the foreign retailers could be allowed entry into India without any conditions, providing the company does not hold a majority stake in the Indian venture. The proposal is expected to be discussed during an inter-ministerial meeting of Indian officials on Monday.
If the proposal gets accepted, it won’t only be good for Walmart — which already has B2B wholesale operations throughout India in a joint venture with Bharti under the Best Price store brand – but also for mid- and large-sized Indian owned enterprises. Their owners will probably cash in and retire in Seychelles.
Walmart and rivals Tesco , Carrefour and Auchan have all been itching to set up their own big-box retail stores in India, but the new law made it too costly.
For the small grocer, Walmart in particular is seen as the bad guy.
Walmart has been seen as the poster child of foreign retail taking over India. For some, they are not welcome.
Walmart has been accused of paying politicians for favorable policies. The company says that its lobbying was within the confines of Indian laws and no official charges were ever made against the company. There is also an allegation that Walmart invested $100 million in the retail business of Bharti in 2010, two years before the Indian government permitted foreign direct investment in multi-brand retail.
An investigative committee, headed by former Chief Justice of Punjab and Haryana High Court Mukul Mudgal, was set up in January after the government announced it would get investigated Walmart lobbying of Indian officials. The Economic Times reported on Sunday that the committee submitted its report last month to the Corporate Affairs Ministry after a three month investigation.
And now Raj Jain, the CEO of Walmart India, left the company on June 26 after a six year stint. The company said he left on his own and was not fired.
India is a puny market for Walmart. But if proposed changes to the foreign ownership laws for Indian retail passes, Walmart and its rivals will grow by leaps and bounds in this big emerging market.
See: Walmart Seeks Changes To India Retail Law – NDTV
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