Executives from the U.S. retail giant Wal-Mart visited India last week to discuss a joint venture with a domestic company in the country's booming retail sector. But as Anjana Pasricha reports from New Delhi, Wal-Mart's plans to enter the Indian market are controversial.
A Wal-Mart company statement says its officials came to India to learn about the market firsthand, and explore the wholesale cash-and-carry business. Company officials visited shopping malls in Mumbai, and met government officials in New Delhi.
They maintained a low profile - for good reasons.
A joint venture between Wal-Mart and an Indian company, Bharti Enterprises, has generated strong concern among millions of small family-owned stores that dominate India's retail landscape.
Their fears found expression in several protests organized in Delhi and Mumbai by a group representing trade unions, traders and communist parties.
Reena Desai is the director of India F.D.I. Watch, an activist group aiming to prevent foreign direct investment in Indian retail. She says many small retailers have already suffered due to the entry of a few hypermarkets and supermarkets established by Indian companies investing in the retail sector. She fears Wal-Mart could have a devastating impact.
"This is the largest corporation in the world, so the amount of money, the amount of capital, the amount of power that they have is so much more times than even the Indian players," she said. "They are going to set a set a whole another standard of how they are going to do business in this country."
Wal-Mart cannot directly operate stores, due to government restrictions on foreign retailers. It plans to provide Bharti with the technology to links farmers and suppliers.
However, efforts by foreign retailers to force open the Indian market are also encountering powerful political opposition. The influential head of the governing
Congress Party, Sonia Gandhi, has expressed concern for local shop owners. The government has asked the industry minister to examine the impact of transnational supermarkets on 40 million people who depend on the retail sector.
Countries, such as the United States and Britain, have long been pressuring for more market access for their companies. But on a recent visit to India, U.S. Commerce Secretary Carlos Gutierrez admitted the issue is not easy.
"Obviously these are difficult decisions. There are domestic matters that need to be taken into account. So we recognize it, these are never easy discussions, but there is a lot to be gained," said Gutierrez.
Retail companies say their entry will modernize supply chains and make goods cheaper for Indian customers.
Regardless of large foreign investment plans, those of large Indian companies may also threaten the small Indian retailers. Domestic competition in retail will likely only intensify as the sector grows. Estimated to be worth $30 billion now, the retail sector is predicted to double in size in a decade.