The highly anticipated re-entry of one of the biggest names in retail, Wal-Mart, into India was a huge disappointment. It has recently dissolved a six-year joint venture with Bharti Enterprises, and eagerly awaits the upcoming general elections; which could mean easing up of restriction on foreign retailers. At present, the laws required foreign retailers to source 30 per cent of their goods from small and medium-sized suppliers; making it harder for them to compete against domestic supermarkets which are not saddled with such restrictions.
Besides, foreign investors are obligated to partner a domestic player so as to enter the India market, with up to 51 percent ownership in local operations. This has resulted in rising investors’ concerns with regards to having no control over the domestic business. Besides, the brand’s reputation could be tarnished if the local player engages in unethical acts, such as corruption and tax battles.
Other global retailers are keeping a close tab on the situation, awaiting policy changes to ease foreign investment. Will this have an adverse effect on the economy amidst concerns of a slowdown?
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