Walmart-Bharti breakup could deter FDI in India
AFPNEW DELHI--The divorce between U.S. giant Walmart and its Indian partner, the latest in a string of foreign corporate alliances to founder, will have a further “chill effect” on vitally needed foreign investment, analysts say.
October 14, 2013, 12:13 am TWN
Citing restrictive foreign investment rules, the world's biggest retailer scrapped a partnership last week with Indian telecom heavyweight Bharti Enterprises and suspended plans to open supermarkets which could have tapped a potential market of 1.2 billion shoppers.
Foreign investors are already spooked by worries over a number of issues: pervasive corruption, red tape, stop-start efforts to open up Asia's third-largest economy, tax battles, decade-low growth and a weak currency, analysts say.
Strict regulations for outside firms include a requirement to source 30 percent of goods from small industry — a deal-breaker for Walmart, which said the goal was impossible to meet.
“This will have more of a chill effect,” Saloni Nangia, president of management consultancy firm Technopak, told AFP.
“From a destination perspective, foreign firms want to be in India. But from a policy and doing-business perspective, it's different,” she said.
“The government needs to make this country investment-friendly. So far it's been pure posturing.”
The Walmart-Bharti break up is one of a long saga of unhappy endings to marriages between foreign and Indian partners, Nangia noted.
“It can be mismatched expectations to blame, disappointing returns, government vacillation on implementing policies, legal and regulatory concerns, ambiguities about what can be achieved — sometimes a mix of elements,” she said.
Walmart president Scott Price said the company would “continue to advocate for investment conditions” that would allow it to invest in multi-brand retail while it focused on its wholesale operations in India.
Many foreign firms had high hopes of India's liberalization drive and voiced strong interest in entering the country.
But those plans have soured in the face of failure to improve infrastructure, long approval delays, bureaucratic hurdles and graft — which has its tentacles in all sectors of the economy.