Sept. 18 (Bloomberg) -- India may decide in two to three months whether to allow companies including Wal-Mart Stores Inc. and Carrefour SA to open retail stores in Asia’s third-largest economy, an official said.
“In the next two to three months, you should expect some traction on the plans,” junior trade minister Jyotiraditya Scindia said in an interview in New Delhi. “We believe that it is an opportunity to multiply jobs. We need to weigh both sides of the issue.”
The government is reviewing feedback it sought in July from interested parties such as local and foreign retailers, and industry associations, Scindia said. The discussion paper prepared by the Department of Industrial Policy and Promotion said foreign direct investment in retail will help bring funds into farms, storage chains and reduce prices.
A decision to allow FDI in multi brand retail will open up the world’s second-most populous country for Bentonville, Arkansas-based Wal-Mart that has struggled to revive sales back home following the worst U.S. recession since the 1930s. Retail sales in India, where economic growth averaged 8.7 percent in the last two quarters, are estimated to grow 53 percent to 25 trillion rupees ($545 billion) by 2014, according to a May report by Business Monitor International.
Indian laws, aimed at protecting the interests of owners of small stores, limit overseas investment to single brand retail or wholesale outlets. Industry groups such as the Confederation of All Indian Traders oppose foreign investment in retail.
“We don’t see any reason to invite these people and we are going to oppose it very strongly,” said Praveen Khandelwal, the group’s secretary general. “I am unable to understand how in a short span of three months the government will be able to consider the feedback.”
Barred from opening retail stores in India on its own, Wal- Mart has partnered with Bharti Enterprises Pvt. in the South Asian country to open wholesale stores and build a supply chain network.
The joint venture operates two wholesale stores and plans to open 13 more by March 2012. Wal-Mart may open “hundreds of” retail stores in India if allowed, Raj Jain, chief executive officer of India operations, said on July 22.
Wal-Mart reported a 3.6 percent gain in second-quarter profit after cutting prices of cereal, detergent and other items. The reductions failed to boost sales as much as anticipated, U.S. stores chief William Simon said on Aug. 18.
Paris-based Carrefour plans to open its first wholesale outlet in New Delhi, Jean Noel Bironneau, managing director of the company’s operations in India, said on July 7. The company is also looking for a local partner to venture into supermarkets in the country. He declined to comment yesterday.
Foreign retailers are betting that their supply chain network and sourcing ability will allow them to reduce food prices by removing intermediaries and selling directly to the consumers. Wholesale-price inflation, driven by food costs, averaged about 10 percent in the first eight months of the year, a sixfold increase from 2009.
--Editors: Sam Nagarajan, Abhay Singh
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