LITTLE ROCK — Wal-Mart Stores Inc. Chief Executive Officer Michael Duke said Monday that he was “hopeful and optimistic” that India will soon allow the world’s largest retailer to open stores by lifting restrictions on foreign investment.
Wal-Mart and rivals including Carrefour SA and Tesco PLC are pushing India’s government to allow foreign investment after the Trade Ministry invited views from the industry on removing the restriction.
The government’s discussion paper said in July that allowing foreign investment in retail will lower prices and benefit farmers.
“The opening of dialogue the ministry has initiated isvery productive, and I view that as progress,” Duke said at a press conference in New Delhi. “India is very important to Wal-Mart and that’s why we keep coming back and why we pay a great deal of attention to India.”
India is the third-most-attractive retail market for global retailers among the 30 largest emerging markets, U.S. consulting group AT Kearney said in a June report. The growing middle class, expanding economy and increasingly brand conscious population will help push retail sales up by 35 percent over the next three years, the consultant said.
Duke is in India to meet with government officials and tour wholesale stores Wal-Mart operates with New Delhi-based Bharti Enterprises Pvt. in the country. Indian laws, aimed at protecting the interests of small-store owners, limit overseas investment to single-brand retail or wholesale outlets.
“The opportunities for foreign firms are enormous,” said Narayanan Ramaswamy, executive director at KPMG in India. “The retail demand in India is huge and next only to China, so there is considerable growth potential for these companies over the coming years.”
The Congress Party-led government has previously been rebuffed in its attempts to obtain political backing from its former Communist allies for plans to allow foreign retailers to invest in India.
“The fear in the big urban towns is that relaxing the laws will drive the mom-and-pop retailers out of business or at least curtail their margins severely,” said Apurva Shah, head of research at Prabhudas Lilladher Pvt. in Bombay. “That is going to be the principal roadblock for the government to do anything.”
Bombay is known in India as Mumbai.
Barred from opening retail stores in India on its own, Wal-Mart partnered with Bharti in August 2007. The two companies are jointly opening wholesale stores and building a supply-chain network.
In April, Bentonville, Ark.-based Wal-Mart and Bharti opened a second wholesale store in the northern state of Punjab. Bharti-Wal-Mart, an equal joint venture, plans to have as many as 15 such stores by the end of 2011.
Duke’s trip to India comes ahead of President Barack Obama’s first state visit to the country. Obama is expected to lead the largest U.S. business delegation to India, and the Obama administration will probably be pushing for greater access for foreign retailers, KPMG’s Ramaswamy said.
“I would definitely think that the Obama delegation will be pushing for greater access. It is a very important part of the retailers’ expansion plans,” he said.
Wal-Mart shares closed at $53.95, down 11 cents in Monday trading on the New York Stock Exchange. Shares have traded between $47.77 and $56.27 over the past year.
Business, Pages 23 on 10/26/2010