Wal-Mart's India Dream Hits FDI Wall
NEW DELHI: Wal-Mart's India dream may lie in tatters with the government
intending to put FDI in retail on the back burner.
Government may now rely on domestic entrepreneurs such as Reliance,
Bharti and Pantaloon in modernising Indian retail sector instead of
seeking foreign investments.
A senior minister in the UPA government confirmed that applications
for even single brand retail entries may face hurdles. It is understood
that decision to review FDI policy in retail sector is mainly due
to the stiff opposition from the Left parties as well as a strong
section within the Congress.
Wal-Mart and other global retail majors had been told by the government
that they will be allowed to invest subject to certain stringent conditions.
Now, even that appears to be in doubt. “Our purpose is to develop
a modern retail sector in the country. Companies like Wal-Mart would
set up limited number of stores in major metros, whereas Indian firms
(Reliance) would open 350 stores at a time.
This would help in creating necessary infrastructure including developing
an efficient supply chain and marketing network. Our objective is
to modernise retail sector and not to allow FDI in retail,” a senior
government official said.
The Indian market is still not closed to foreign retail firms. “They
can also follow cash & carry wholesale trading route where 100% FDI
is allowed,” an official added. The change in government's strategy
is also reflected in the approach paper to the Eleventh Five-Year
The paper, released recently, is silent on the issue of FDI in retail.
Interestingly, the same Planning Commission, had made a strong case
for allowing FDI in modern retailing few months ago in the Mid-Term
Appraisal (MTA) of the Tenth Five-Year Plan.
FDI in retail was identified as one of the key 'action points' emerging
from MTA and the Planning Commission was asked to prepare a 'simple
note' on the issue. A Indian Council for Research on International
Economic Relations (ICRIER) study also suggested that FDI is required
in retail sector.
The study was commissioned by the ministry of consumer affairs, food
and public distribution. Accepting that there is a shift in government's
strategy with regard to FDI in retail sector, a Planning Commission
source said: “Modern marketing and the involvement of corporate entities
buying directly from farmers for retail domestic marketing, agro-processing
and exports will have to be encouraged if agricultural diversification
is to take place.”
“But this does not necessarily require FDI,” he added.
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