India Mulls Relaxing Rules on Foreign Retailers

Aug. 6, 2010
Analysts estimate that India's retail sector is worth $450 billion. However, India's government has kept this giant marketplace largely closed to foreign firms. Could all that be about to change? Late last month, Indian officials circulated a discussion ...

Analysts estimate that India's retail sector is worth $450 billion. However, India's government has kept this giant marketplace largely closed to foreign firms.

Could all that be about to change?

Late last month, Indian officials circulated a discussion paper about easing up on the restrictions, and not surprisingly, that move has ignited international debate. As it stands now, overseas firms can only operate in India as wholesalers and they are required to partner with domestic firms. But, a few weeks ago, Walmart said it could open "hundreds of stores" in India if the country unlocked its retail sector to foreign investors.

Of course, achieving that goal would require significant improvements to the supply chain. As Reuters points out, "in a country where at least 40 percent of produce is wasted because of inadequate storage and transportation, large investments in warehouses, refrigerated trucks and other amenities are needed."

Currently, organized retail accounts for only 6 percent of the total retail sector in India. The remainder is in the hands of "mom and pop" shops, which rely mostly on farmers and other local suppliers. Overhauling the system to accommodate retailers like Walmart could take years. In fact, the managing director and chief executive of one of the few Walmart wholesale ventures allowed in the country, predicts India needs at least a decade to establish a supply chain of "international quality and standard."

A decade and plenty of foreign capital, that is. What investment in time, effort and resources would you be willing to make in order to gain market share in the world's second-fastest growing major economy?

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