Walmart International President and CEO Doug McMillon said here today the Indian government’s concerns over allowing foreign direct investment in multi-brand retail were misplaced. “I understand your government’s concerns that such a move will affect kirana shops, but don’t necesarily agree with that view,” he said.
McMillion gave the example of Mexico, which allowed foreign direct investment (FDI) in multi-brand retail in 1991 after a huge debate over whether that move would ruin local retailers. “Even now, half the market in Mexico is controlled by local mom-and-pop stores,” he said, adding: “The lesson I can draw is, don’t be obsessive about looking after the interests of retailers”. Walmart operates in Mexico under the Bodega Aurrera brand.
The global head of the world’s largest retail chain said inflation was another big concern for a retail chain like Walmart which is all about lowering prices for customers.
Saying the Indian retail opportunity was terrific, McMillon said the retail giant was to make a case that “we can help with inflation in India”. WalMart was deliberately selling onions at purchase price in India to address consumer needs.
So, his pitch is simple. Allow Walmart to invest in more stores and make more profits, so that it can plough money back into India’s food supply and cold storage infrastructure, which, in turn, can help the retail chain keep prices low on essential consumer products.
McMillion was quick to add that Walmart has been sourcing products from India for a long time and intends to increase its presence in the world’s largest democracy. It already has six cash-and-carry wholesale stores and provides back-end support to over 100 small outlets under the Easy Day brand, in a franchise relation with the Bharti Group.
“We also intend to make huge investments in setting up logistics such as cold chains etc in India,” he said.
Walmart has been expanding aggressively in other markets. Just last week, it completed its acquisition of a 51 per cent stake in South African retailer Massmart Holdings for about $2 billion.
Earlier this year, Walmart started working with farmers in India with “direct farm programmes” in Punjab and Delhi, providing basic agricultural techniques and more efficient transportation. Walmart has already said its goal is to buy directly from 35,000 small and medium farmers in India by the end of 2015. The retail chain has also said allowing foreign investment in retail can curb inflation, increase efficiency in the supply chain, and create as many as three million jobs in India.
Reacting to McMillon’s concerns about the delay in alowing FDI in multi-brand retail, Planning Commission Deputy Chairman Montek Singh Ahluwalia said while the government is still grappling with the issue, many ministries and the Plan body itself is all for allowing it. “But these things need to be discussed and debated in a democracy,” Ahluwalia said.
Ahluwalia also said multinationals must understand the different pulls and pressures. For example, he said the National Bureau of Economic Research, a US-based think-tank has just given a report saying Walmart is not good for employment, as it distorts the local labour market. “This didn’t come from any Indian political party. It came from a resaerch body in a country which practises free market as a religion,” Ahluwalia said.
The comment evoked only a wry smile from Walmart’s global head.
