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51% FDI in retail exceeded Walmart's initial expectations

December 06, 2011 16:38 IST

DollarsWalmart, world's largest retailer, had informed the Industry Ministry last year that it is comfortable with India allowing 49 per cent foreign direct investment in multi-brand retail, in view of 'political sensitivity' in the country.

The Union Cabinet in its decision of November 24, which has since been put on hold, permitted 51 per cent FDI in the multi-brand retail, well above expectations of the Walmart and its Indian joint venture partner -- Bharti Group.

In its response to the discussion paper by the Department of Industrial Policy and Promotion, Walmart India president Raj Jain, also managing director of its joint venture with Bharti, said that the US giant would ideally like 100 per cent FDI. However, for starters, it is comfortable with 49 per cent, he added.

"Bharti Walmart recognises, however, the political sensitivity around the retail sector. Recognising the government's stand to adopt a calibrated approach, we would endorse a position where as a first step, multi-brand retail is opened up at 49 per cent," Jain said in the memorandum submitted to the DIPP on July 30, last year.

Similar views were expressed the American Chamber of Commerce, which has around 500 members, 95 per cent of whom are the US firms with operations in India. ". . . given the government's desire to have a calibrated approach, Amcham recognises the importance of a phased change of allowing the first step of 49 per cent FDI," it said.

However, French retailer Carrefour and the US-India Business Council pitched for 51 per cent foreign stake in multi-brand retail right from the beginning.

FDI in retailing was permitted in China in 1992. Foreign retailers were initially permitted to trade only in six provinces and special economic zones and foreign stake was initially restricted to 49 per cent.

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