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India’s $450 billion retail market is difficult to reach, even for the large retailer Wal-Mart (NYSE:WMT), which plans to open three to five new wholesale stores in the country by the end of the year. Foreign ownership regulations in India usually do not allow global hypermarket and supermarket chains to open outlets in the country, and so Wal-Mart’s Indian expansion must come in the form of wholesale stores, run in partnership with Bharti Enterprises, owner of India’s top telecom operator Bharti Airtel Ltd.
The nation’s laws looked poised to change after the government agreed to propose a legislation that would allow foreign multi-brand retail chains, like Wal-Mart and French multinational Carrefour, to own up to 49 percent of local subsidiaries. The government sees foreign supermarkets as a way to improve the food supply chain and bring down food prices. However, following a backlash from shopkeepers and the opposition party, who fear the legislation will ruin small businesses, the government was forced to reverse its position last December.
If the proposed change does eventually make it past India’s parliament, Wal-Mart will be well-poised to expand its operations because of its local partnership. While it currently operates 17 wholesale stores under the “Best Price” branding, partner Bharti owns 186 “Easyday” stores across the country. The joint venture is optimistic that the government will eventually allow foreign multi-brand retailers to enter the market.
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