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Anjana \n Pasricha, Voice of America<\/i><\/p>\n Anjana \n Pasricha, Voice of America<\/i><\/p>\n
New \n Delhi, October 11, 2013<\/i><\/p>\n
\n After waiting for years to open superstores in India, the world\u2019s \n biggest retailer, Walmart, has split with its Indian partner, \n delaying its ambitious plans to expand in the country. India opened \n the door for foreign retailers last year, but tough regulations \n are proving to be a deterrent, and virtually no foreign chains \n have come forward to invest in the country\u2019s $400 billion \n retail sector so far.<\/p>\n
After parting ways with its Indian partner, Bharti Enterprises, \n this week, Walmart said it will continue to run the 20 wholesale \n stores that the two companies operated jointly. <\/p>\n
Although it has not “packed its bags”,the announcement \n indicated that the global retailer\u2019s plans to open large \n supermarkets to sell directly to consumers in India have been \n put on hold.<\/p>\n
That is because foreign companies cannot open retail stores without \n an Indian partner, although they can own wholesale businesses.
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\n Walmart was the most enthusiastic about the massive potential \n in India, where the retail business is dominated by “mom \n and pop” (small, privately owned) stores. It was expected \n to be the first to crack the market after the government opened \n the sector to overseas investors last year. <\/p>\n
But a year on, there are virtually no takers in the supermarket \n sector. <\/p>\n
Retail analysts say Walmart and other foreign investors have \n been discouraged by stringent entry conditions imposed on overseas \n retailers. The government imposed these to make the liberalization \n measure, which has sparked fierce opposition, more politically \n palatable. <\/p>\n
Devangshu Dutta, head of retail consultancy Third Eyesight, \n cites one example of the kind of measures that are putting off \n investors: a rule that requires them to source 30 percent of their \n products from small and midsized Indian businesses.<\/b><\/p>\n
\u201cIf you look at Walmart\u2019s overall sourcing mix, \n a very large chunk of manufacturing happens in China and other \n Asian markets. India is growing, but it is quite a small fraction \n of their sourcing, which means they would need to take the time \n and effort to develop the Indian supply base to their standard,” \n said Dutta. “That takes time and it\u2019s a dampener if \n you are looking at a quick start.\u201d<\/b><\/p>\n
Walmart\u2019s Asia Chief Executive Scott Price has also cited \n the sourcing rule as a \u201ccritical stumbling block.\u201d
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\n By opening up the retail sector, the government was hoping to \n attract billions of dollars in foreign investments to shore up \n India\u2019s faltering economy.<\/p>\n
But the head of the Retailers Association of India, Kumar Rajagopalan, \n said \u201ctoo many clauses\u201d are hampering such investment.<\/p>\n
\u201cThat is putting in too many spokes in the wheel. Many of \n the retailers from overseas come in and see that there are 48 \n licenses to take in India. They don’t know how to handle so many \n licenses, how to take care of so many compliances,\u201d stated \n Rajagopalan. <\/p>\n
Analysts also said foreign retailers will probably wait until \n after India\u2019s elections, scheduled to be held by next May, \n before making a decision on investing in the country. That is \n because the entry of overseas chains continues to be a politically \n charged subject, and there are worries about how any change in \n government may impact India\u2019s retail policy.<\/p>\n