Wal-Mart Stores, Inc.(NYSE:WMT) is planning to open retail outlets in India over the next 12-18 months. The company declared this on Friday, making it the first multinational firm to jump on the decision made by the government top open the country’s huge retail market to foreign competitors.
The managing director of Bharti Wal Mart, a joint undertaking operating 17 outlets that cater to small businesses in India, Raj Jain, confirmed through an email that Wal Mart is planning to open stores that would serve customers over the next 18 months. He, however, refused to disclose the number of stores.
Last week, India had announced that it would let foreign companies to take a majority wager in multi-brand stores for the first time. The decision came as a surprise to a number of investors. At the same time, it cost the ruling Congress Party a crucial coalition ally.
Rivals say that the venture will cost Indian jobs and decimate millions of shops. Advocates feel that welcoming players like Wal Mart is vital to attract the investment required to modernize Indian food supply chains, reduce wastes and topple food costs.
A partner in the retail practice of management consulting company, A.T. Kearney, Michael Moriarty said that since India lacks retail infrastructure like warehouses and cold storage areas, Wal Mart can bring its own systems.
The new regulations command that foreign retailers use half their investment on building supply chain infrastructure and source 30% of manufactured goods from local medium and small sized firms. Foreign retailers are restricted to 53 cities in India with populations more than 1 million.
Each state will have the right to decide whether to allow the retailers to operate from their territory. Out of 35 states and territories that are controlled by the ruling Congress Party, only 10 are likely to welcome foreign retailers initially, as per David Sloan, an analyst at Eurasia Group.