Planet’s top retailer soft-sells pluses for India in letting FDI rip.
On his current visit to India, Michael T Duke, chief executive of the world’s largest company, Walmart, ventured into one of the wholesale trading stores set up by the company in Punjab. The 60-year-old was so moved by the display that he felt the urge to buy something. He could not, because he does not hold a business licence in the country.
One wonders what Duke, who confesses to a love of sports cars (which he indulged after becoming Walmart’s CEO early last year by purchasing a used black Porsche 911 Carrera), may have been tempted to buy in a Walmart wholesale store, which have far less interesting things, in large packages, lined up from floor to ceiling. But it seems to have rankled him no end that he could not buy anything there.
That brings us to Walmart’s pet peeve: India’s restrictive policy on foreign direct investment (FDI) in retail, which ensures a multi-brand chain like Walmart does only wholesale trade here — selling to retailers, restaurateurs and caterers, who in turn sell to individuals. The company’s Best Price stores have customers who are registered with it as members on the basis of any of the 18-odd government documents that certify them as retailers. The minimum value of a transaction has to be Rs 500.
Duke can shell out Rs 500 in a jiffy, but he was denied by the policy. Little wonder then that the leitmotif of his visit to India has been FDI in retail, in addition to “constructive discussions on the economy” with Planning Commission deputy chairman Montek Singh Ahluwalia and “open, collaborative and positive” discussions with commerce minister Anand Sharma.
Duke could not help talking about the subject in every other sentence of his opening remarks in an interaction with journalists on the 16th floor of the Maurya Sheraton here today. He did not need help later, when the floor was thrown open to questions – every journalist wanted to ask about FDI. One even went to the extent of asking if a deal had already been done with the government and the announcement was a merely formality. Another wanted to know if US President Barack Obama’s visit early next month would indeed unshackle Walmart (annual revenue $408 billion) in India.
‘Why you should’
Duke wouldn’t confirm either – “It’s a question you should be asking the government” – but was not shy of elaborating on the virtues of opening retail to FDI. Perhaps briefed well by aides on the kind of support that has put the United Progressive Alliance in power in the last two Lok Sabha elections, he chose his spots well.
“Opening up FDI has positive impact on farmers,” he began. “Suppliers to local retailers (typically farmers, small traders) can become exporters, supplying to Walmart’s global operations.”
He wasn’t done with that. Next, he focused on the issue that has proved to be tricky for UPA: Food inflation. According to Duke, a large part of the reason for rise in food prices can be put down to a bad supply chain. Extolling the virtues of an efficient chain, he said 30-40 per cent of the produce never reached consumers and this waste showed up as a rise in prices. Organised retail, he said, enhanced food safety and hygiene, areas in which India could do with a bit of improvement. “Creating efficiency, reducing waste can manage the cost increases,” he said. And, before you knew it, he was at it again. “In India, we have the opportunity to work right up to the farmers…”
Duke went on to say that he appreciated the consultative approach taken by the Indian government to FDI in retail. He would be hoping that the government appreciates his choice of words.
