India Fdi Decision’s Impact on Walmart

BUAD 497: India FDI decision’s impact on Walmart

Karan Ashar

In 2007, global retailer Walmart entered the Indian market through a partnership with Bharti Enterprises. The joint venture was created with a purpose to to build and operate cash and carry superstores in India under then name Best Price Modern Wholesale. Till two months ago, the Indian government allowed 51% FDI in food retailing sector. Additional restrictive policies further stagnated growth of interested investors. The regulations were implemented to protect the local mom and pop shops around the country, which provided a source of living to several poor families. However, in June, Indian Prime Minister Narendra Modi increased FDI investments in marketing of food products to 100%, provided the products were manufactured and purchased in India. This was considered a significantly progressive policy as it would allow increased operation and presence of large US retailers such as Walmart and Amazon. Additionally, the regulations applied for ecommerce too. 

While the decision can be lamented by local shops owners, it can be viewed as highly positive for the local food industry. Walmart can bring in its logistics and add value to operations. Increased influx of resources can create infrastructure and reduce wastage in the production process. Consequently, increased efficiency in production and reduce cost can increase wages for farmers, which is predicted to multiply twice. While this decision is likely to boost local food industry, it will provide a struggle for local shops that are not big enough to reap economies of scale, and consequently charge higher prices. Lastly, while regulations are progressive, Walmart operations will need to be approved by Foreign Investment Promotion Board.