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Archive for November, 2012

The first Walmart store opened in North India in 2009. The arrival of the retail behemoth signaled how India has started to play increasingly with foreign entities and slowly but surely, opening up its guarded doors of yesteryears to the world.

1.2 billion people make for a very lucrative and appealing market. However, historically, this market had been closed to non-Indian MNCs. It was only starting in the early 90s that India finally started to open up its doors to let foreign goods come into the hands of the local Indian. This groundbreaking initiative was heralded by one man – Manmohan Singh.

Singh now sits as the leader of Emerging India – and is the core architect of another immense initiative. That to increase Foreign Direct Investment (FDI) in India. The locks on the various sectors are opening up one-by-one to let in foreign companies to establish shops within Indian grounds. One of the latest sectors to open up is the retail brand sector – which is the cause for entities like Walmart to place their foot in India.

FDI within retail has its supporters and its opposers. The pro side cites issues such as supply chain improvement as a strong basis to let big box retailers enter India. Currently, the Indian system is a mixture of local small-owner stores and peppered with some supermarkets. The way current system is laid out makes for a very confusing, messy system with many tangled wires. However, this system provides basis for some of the anti-arguments. The opposers are worried that with the arrival of entities such as Walmart, small-shop owners will be driven away due to pure price-based competition because of the the ability of Walmart to secure financially lucrative partnerships with its suppliers. To an Indian consumer, sensitive about price, this makes for a huge case to shift from his known local grocer to a much cheaper and reliable (in terms of quality of goods) Walmart.

The way the story FDI in India will unfold is still somewhat unknown. One can look at trends from other countries that have undergone similar transformations. However, since India is itself an interesting market – certain challenges will mark the course for how the country embraces FDI. For example, all has not been smooth sailing for Walmart India as it tries to understand the bribery system within the country. It has, at the time of the publication of this article, suspended its employees in India as it investigates accusations of bribery within its Indian (and some other countries’) operations.

However, all in all, this does not discount the fact that India is ranked among the top 3 countries to invest in according to different surveys. Over the course of the last decade itself, India attracted a cumulative amount of FDI equity inflows of US$ 186.79 billion. It will be intriguing to see the evolution of FDI as the country evolves its core business methods through partnerships with foreign MNCs.

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