Walmart Stores Inc, the world’s largest retailer, said India’s inflation would slow by at least two percentage points, should the government agree to allow an increase in foreign investment in the sector.
“The benefits foreign direct investment in retail can bring to contain rapid inflation” are the subject of “serious debate in government,” Raj Jain, managing director of Bharti Walmart Pvt Ltd, said in an interview late yesterday. Walmart, based in Bentonville, Arkansas, operates wholesale stores in India through a venture with Bharti Enterprises Ltd.
Walmart and rivals such as Carrefour and Tesco are betting their global supply-chain networks will allow them to bring down prices in India, the world’s second-most populous country. India’s laws, aimed at protecting owners of smaller shops, currently limit overseas companies to operating single-brand outlets or wholesale stores.
Pressure is mounting on Prime Minister Manmohan Singh’s government to quell concern that rising food prices will stoke inflation, already at a 16-month peak. An index measuring wholesale prices of lentils, rice, vegetables and other food articles compiled by the commerce ministry rose 17.7 per cent in the week ended March 27 from a year earlier.
Jain said he’s “pretty confident” that “opening up of foreign direct investment in retail” can push down the inflation rate by “at least two per cent”.
‘Worrying area’
Planning Commission Deputy Chairman Montek Singh Ahluwalia said on March 17, that “inflation has moved into a worrying area”.
Singh still needs to build political support for allowing foreign retailers in India, said Abhijeet Kundu, an analyst at Antique Stock Broking Ltd in Mumbai.
“The prime minister is in favour of allowing foreign investment in retail, but there is still no consensus among the political class,” Kundu said. “India is among the least penetrated markets in terms of organised retail.”
Opposition to economic changes “has happened in earlier coalitions, it is bound to happen”, Finance Minister Pranab Mukherjee said in an interview with Bloomberg-UTV news channel on February 28. “We shall have to resolve these issues.” The finance minister in his budget speech on February 26 said India needs to take a “firm view” on opening up the retail sector to bring down food prices.
Debate initiated
Walmart fell 0.55 per cent to $54.72 in New York trading yesterday and has gained 2.4 per cent this year, lagging the 7.4 per cent increase of the S&P 500 Index.
The government has initiated a debate on allowing foreign investment in retail, Jain said in a phone interview from the northern city of Chandigarh.
“For the first time there is a discussion happening and there is a positive spin to it, but whether it will happen in the next six months or two years is difficult for me to say,” Jain said. “The prime minister has talked about the opening of foreign direct investment in retail at the time of the chief ministers’ conference on food security and inflation in February.”
Anand Sharma, minister for commerce and industry, couldn’t be reached for comment today, a public holiday.
Sales of retail chains may rise as much as 35 per cent a year until 2015 to $80 billion, according to an August 2008 study by consultant McKinsey & Co.
Walmart and Bharti Enterprises opened their second wholesale store in the northern state of Punjab yesterday. Bharti-Walmart, an equal joint venture, plans to open seven stores this year and have as many as 15 by March 2012, Jain said. Walmart and Bharti formed the venture in August 2007.
