This Time We Mean It: India Clears the Way for Walmart and Friends

India’s government announced a dramatic suite of reforms on Friday designed to breathe new life into the nation’s flagging economy.

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Saurabh Das / AP

Consumers shop at a Bharti-Walmart joint-venture store on the outskirts of Chandigarh, India, on Sept. 16, 2012

India’s government announced a dramatic suite of reforms on Friday designed to breathe new life into the nation’s flagging economy and combat criticism that the second-term coalition is mired in a state of so-called policy paralysis. Among the changes is a long-debated plan to allow up to 51% foreign direct investment (FDI) in local ventures by multibrand retail outlets like Walmart and Carrefour, as well as allowing up to 49% FDI in India’s beleaguered airlines and relaxing regulations for foreign single-brand retail outlets. The announcement followed a controversial 14% hike in diesel prices and a cap in the number of subsidized cooking-gas cylinders allotted to each household, sparking protests across the nation on Saturday.

Prime Minister Manmohan Singh and his colleagues have made a bold move with the series of sweeping reforms. In November, the government approved a plan to allow FDI in multibrand retail, only to suspend the decision days later after it met a storm of protest from members of both the opposition and the Congress Party–led ruling coalition, most notably Mamata Banerjee’s Trinamool Congress. Banerjee and other FDI critics say the plan will chiefly benefit foreign companies while putting untold numbers of small-business owners in India’s vast informal sector out of work.

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Now that the government has reaffirmed its intentions, detractors have again lodged their complaints. Sushma Swaraj, leader of the opposition Bharatiya Janata Party, tweeted that the decision was a “blatant betrayal of the assurance” given in December that the government would reach a consensus on the issue before pressing ahead. Trinamool Congress issued a 72-hour ultimatum to its coalition partners to withdraw the reforms — or face the consequences. Whether those consequences might include withdrawing from the coalition is not yet clear, but evidently the Prime Minister and other Congress Party leaders deemed it was worth the political risk vis-à-vis mounting pressure to turn the economy around. “Let us not confuse consensus with unanimity,” Commerce and Industry Minister Anand Sharma told journalists on Friday, as reported by the Hindu. “For unanimity, we will have to wait in eternity.”

In light of the news, analysts have said they expect the Reserve Bank of India will follow with an interest rate cut on Monday. The host of developments have been welcomed by both domestic and international business communities after global rating agencies’ recent knocks on the Indian economy’s prospects. Rhian Chilcott, international director of the Confederation of British Industry, said in a statement, “While we understand the political sensitivities around these decisions, we believe that they will ultimately benefit the citizens of India.” Chilcott cautioned, however, that it will be important to “see the detail behind this and follow the implementation closely.”

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Indeed, how or to what extent the reforms will be carried out is still an unknown quantity. The government has left it up to each state to decide whether they want global big box brands to set up in their borders or not. The Cabinet has stipulated that, in most locations, the multibrand retail outlets may only set up in large cities, and that in the case of multibrand retailers, half of the required minimum $100 million investment has to go into back-end infrastructure. Supporters of the move say the global companies will provide employment for thousands, help farmers cut out middlemen and contract directly with the companies, and improve India’s supply-chain apparatus.

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MORE: Amid Charges of ‘Paralysis,’ India’s Government Defends Its Record

25 comments
Kajua
Kajua

Finally a break through, India's middle class is ideal to target for potential  investment.

karur
karur

Despite the sloppy manner in which India inches forward, it is truly remarkable that in all of Asia, India is the only country with a billion people  that has shown that economic growth and democracy can work together. The West is enamoured with the Chinese model, where the communist party can acquire land, resources and labour through a decree in Beijing. This approach to development has done China well but at a huge cost. Unrest is slowly building and China is now coming to understand what Islamic unrest amongst the Uighurs could do to undo development. Dr. Singh and the Government must be complimented on sustaining growth in excess of 6 percent for almost 20 years, which is why India is a serious player. Despite all the noise, no party in India can push an anti-development/growth agenda. With over 50% of India being below 25 years, eager to double their salary within 5 years, India needs walmart, cheap power, infrastructure etal in a hurry. Bravo, India

Muriel Heslop
Muriel Heslop

We might make too much of potential growth of these emerging contries like India and China.  We should think more carefully because nobody know whether such these nations with huge amount of population could correctly and always benefit the world economy.

Chhajuram Induscharwak
Chhajuram Induscharwak

 Now reform agenda seems in do or die position but India has history of unity and total disunity. We pray for changing this game of history.                             

jatindershoon
jatindershoon

Lead the country in right direction and finally Manmohan  Singh and the party realized how important it is for the country to open the markets to foreign investment.Look at what is happening with war of words, war threats going on between China and Japan, the largest investor and trader with China, and it wont stop. Countries will rather invest in democratic India then cheap China, what they need is a strong rule of law open market and less stifling  bureaucracy.Indian business men is one of the shrewdest person on this planet, do not undermine your own great brains.Beware of politicians, who read less, know nothing about international business, except how to generate votes at country expense. It is the Indian poverty at threat not independence.To generate wealth you must import to export,and for that you need wealth, technology and experience and the greatest example is the world largest company,"WALMART," who has single handedly brought China great,{to quote Mao,"LEAP FORWARD" There is nothing to fear, but fear itself, India is country full of great BRAINS and very successful one.India brand is known and copied all over the world.The YOGA,and NON-VIOLENCE is taught and practice all over. Learn from your successes and mistakes  move forward with new technologies and wipe out the Indian poverty.

Phoenix31756
Phoenix31756

That picture sure doesn't look like my local Wal-Mart store !

But it may look like a SAM's CLUB !

IAF101
IAF101

WalMart in India is currently only a wholesale outlet where retailers can buy stuff. Thus the warehouse asthetic.

mamaotis
mamaotis

Walmart has a very bad record of buying product locally even when it has said it would do so. They will ship product in from half way around the world because they're a globalist corporation with strong ties to other international entities. BigAg, BigPharma, BigOil inevitably work in conjunction to obliterate small individual businesses and farms thus increasing local poverty. We have seen it happen here in the US with corporate takeover on many levels and it's no different in India or anywhere else in the world. Rule by government-corporate power is a scourge wherever it takes hold.

IAF101
IAF101

While that maybe true, it is also true that WalMart etc have invested billions in things like cold storage, super fast shipping and have given local manufactuers the opportunity to sell their products half way around he world without the hassle. Of course there needs to be a balance and India will have to balance big corporate efficency with small private retail. India is just too big and too densely populated for the WalMart superstore idea to totally replace the small retailers.

Prithvi Shiv
Prithvi Shiv

About time too. India's  agrarian sector is its true strength, not the services that have recently arrived on the scene. India's already losing its cost and competency advantages to other low cost centers like the Philippines and given its infrastructure woes, this trend may continue for some more time. Not saying we abandon these verticals completely, but it's time to reprioritise.

Agriculture is something that really cannot be outsourced. In the coming decades, food and cash crops are going to be pretty profitable bets in terms of building economic prosperity if managed properly. For that to happen, our farmers need to stop migrating to urban centers in search of better jobs, farming needs to become profitable and lucrative. This is one important step in that direction. Let's hope more is to come.

f_galton
f_galton

Finally they can pay everyday low prices for Cobra Chow.

DrVeeS
DrVeeS

i would like to pay everyday low price for the typical Maple Syrup ! Recently visited USA  for research and was introduced to it, loved it but sadly the shops here in New delhi don't sell that except a poor version of it at exorbitant price.

- a doctor from New Delhi

IAF101
IAF101

Maple syrup is avaliable in many many stores where it is directly imported; you can even find a brand that you are looking for if you know the right stores to look.. India is no longer a place where you have to import goods through visiting friends and family.

DrVeeS
DrVeeS

rather than answering vaguely, IAF101 could you specifically tell the name of shop in South Delhi (I work at AIIMS) which sells 100%maple syrup and mapleamp;brown sugar Quaker Oats

I have scanned the entire khan market  and the best i could manage was 2% maple syrup selling for $12 and flavorless quaker oats selliung for $9. All imported !

During my times at Johns Hopkins this summer, i visited Port Covington Dr walmart at baltimore over 6 times. I was amazed by the variety of cereals and sauces and syrups that they had. The stadium-like size of the store  fascinated me . Although I am emigrating from India in 3 years , but i want my india family to enjoy all the creature comforts that the regular American enjoys .

DrVeeS
DrVeeS

iaf 101, in New Delhi Khan market and Defence Colony are the areas  mainly selling imported food products. Last week i spent 4 hours scanning these area for grade 1 maple syrup. No shop had it. The best that they had was 2% maple syrup selling for $12. The shopkeepers were boorish , slightly irritated and  condescending when they saw that i was paying through an Indian debit card ( which revealed in a way my nationality to them ) . I visited the Baltimore Port covington Dr Walmart more than five times while working at Johns Hopkins and i was amazed by the variety of cereals and syrups that they had to offer. The staff didnt flinch when i put out my debit card (from bank of america or state bank of india)

Rather than answering vaguely, please let me know where exactly do we find 100% maple syrup in india ( and perhaps Maple and brown sugar quaker oats )????

duduong
duduong

Facing the prospect of economic stagnation, India has chosen structural reform over superficial fixes such as monetary easing like America's QE3 or fiscal stimulus like China's infrastructure building binge, not to mention Europe's near total paralysis. Singh is to be commended.

Kajua
Kajua

Singh knows his party is not going to win coming elections so time to pocket the cash and leave.

HerryMurray
HerryMurray

Lillian replied I am inspired that people can profit $6631 in one month on the network. did you look at this(Click on menu Home)

IAF101
IAF101

Not so fast. Singh is the one who let it get so bad in the first place. Singh is the person who heads the largest welfare program in India's history pumping billions into the rural economy with everything from free electricity to free food, to free housing, to free dole, to subsidized diesel, kerosene, lpg, fertilizer, etc. This largess has only one function - populism that wins elections not economics!

QE3 and fiscal spending have injected cash where needed without causing inflationary pressures. Welfare spending and policy paralysis has cost India 5-6 years in economic growth.