New Delhi: Wal-Mart Stores Inc. is set to open its first cash-and-carry centre in India next week in a signal of foreign investor confidence in India just days after a reform-minded Congress-led coalition won an election.
The entry of multinational retailers such as Wal-Mart into India has been mired in controversy, with moves to open up the sector opposed by the previous government’s former Leftist allies and small traders fearful of job losses.
Bharti Wal-Mart Pvt. Ltd, a joint venture of India’s Bharti Enterprises and Wal-Mart, will open the wholesale centre in Amritsar in northern Punjab, a spokesman said.
Positive sign? A Wal-Mart store in New Jersey, US. After the Congress-led coalition won the election and the Left suffered losses, there are expectations of renewed interest, and reforms, in the retail sector. Daniel Acker / Bloomberg
“It will be opened early next week,” Arun Mowar told Reuters. India’s fragmented and tightly controlled $400 billion (Rs19.1 trillion) retail industry is forecast to nearly double in size by 2015, but less than 5% of the market is in the hands of modern retailers.
“The timing’s opportune. It will be seen as a positive sign to others who are waiting on the sidelines,” said Arvind Singhal, chairman of consultancy Technopak Advisors Pvt. Ltd.
“It is reason to be optimistic that we will see a fair amount of interest in the retail sector, and to expect that we will see some reforms in retail,” he said.
Wal-Mart’s Indian venture, which had been planned for 2009, as well as alliances of other global firms keen on a toehold in the rapidly expanding market, have been delayed by fierce opposition from small traders.
Under the previous Congress government many foreign investment projects were criticized by its Communist allies.
After the Congress’ election win on Saturday, and the major losses suffered by its former Leftist allies, the Left has effectively been robbed of influence in the new government that is keen to pursue reforms as India faces its slowest growth in six years.
“We knew this would come, specially after the election victory,” said Nilotpal Basu, a senior Communist Party of India (Marxist) leader.
“The retail sector generates the second highest employment after agriculture, and if they go ahead with such plans (foreign investment), there will be repercussions. We will oppose any such move,” he said.
Foreign multi-brand retailers are now limited to wholesale or licence and franchise operations in India, with such global names as Metro, Tesco and Marks and Spencer already present, and Carrefour scouting for a partner.
The Bharti Wal-Mart centre, named Best Price Modern Wholesale, will be the first of 10-15 planned wholesale facilities in India, measuring about 50,000-100,000 sq. ft each, and employing about 5,000 people over the next seven years.
India’s financial markets hailed the Congress party’s decisive victory, and on Tuesday, GE Hitachi Nuclear Energy—a venture of General Electric Co. and Japan’s Hitachi—signed a power plant development agreement with India’s Larsen and Toubro.
India’s civil nuclear deal with Washington, which threatened to bring down the previous government after the Left withdrew its support, is forecast to bring in $27 billion in investments.
Foreign retailers, faced with sluggish growth at home, will be keen to expand their presence in emerging markets such as India, but must temper their expectations for sweeping reforms, said Hemant Kalbag, a partner at consultancy AT Kearney.
“The same Congress has followed a slow and cautious approach to retail for five years,” he said.
“There may be greater pressure now from investors, and perhaps they will ease some rules, but don’t expect them to open it up entirely.”
Bappa Majumdar contributed to this story.