Walmart urges India to open up retail sector

Mike Duke, the chief executive of Walmart, has delivered a rare high-profile plea to the Indian government to open up the country’s retail sector to direct foreign investment.

The plea comes days before the arrival in the country of President Barack Obama and a large US business delegation.

Mr Duke told a meeting of the Federation of Indian Chambers of Commerce and Industry in New Delhi that Walmart, the world’s largest retailer, understands the government’s “calibrated approach” to the opening of the sector.

But he repeated the argument that allowing international retailers to own and operate their own stores would bring a range of benefits to India, including the modernisation of food distribution and the growth of small and medium supplier businesses.

Currently, foreign investment is restricted to 51 per cent in single-brand retail and is barred entirely from multi-brand retail.

An Indian government discussion paper published this year said that allowing greater foreign investment in retail would lower prices and benefit farmers.

Mr Duke said Walmart estimated that “certain increases in direct foreign investment are likely to reduce India’s inflation rate 50 to 70 basis points”, from more efficient logistics and reduced waste.

Walmart’s presence in India is currently limited to four “cash and carry” Best Price stores it has operated in a joint venture with Bharti Enterprises, a local business group, opening the first store last year.

Mr Duke said the joint venture planned to have between 10 and 15 stores open over the next two years, although Rajan Bharti Mittal, managing director of Bharti Enterprises, said his company could roll out 15 new stores “ahead of time” by the end of next year.

As part of the retailer’s efforts to win political support in India, Mr Duke highlighted plans to source fresh fruit, vegetables and meat for the stores directly from 35,000 small farmers.

Subodh Kant Sahai, India’s minister of food processing, said on Tuesday that a decision over any further relaxation of FDI restrictions was only likely to be made next year.

AT Kearney, the US management consultants, forecast that India’s growing middle class among a 1.2bn population would help push retail sales up by 35 per cent over the next three years.