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Fury erupts as India opens door to Wal-Mart, other big foreign firms

One lawmaker says she'll burn down any store the foreign retailer opens in the country. The uproar highlights the divide between the emerging middle class and the poor.

November 25, 2011|By Mark Magnier, Los Angeles Times
  • Vendors wait for customers at a vegetable market in New Delhi. Experts predict that stepped-up competition as big foreign retailers are allowed to set up shop will sharply reduce the number of small businesses in India  the nations second-largest employer after farming. But benefits are also predicted.
Vendors wait for customers at a vegetable market in New Delhi. Experts predict… (Gurinder Osan, Associated…)

Reporting from New Delhi — The Indian Parliament adjourned in an uproar Friday over the government's decision to let large international retailers enter this long-protected market, leading an opposition leader to threaten to burn down any Wal-Mart that opened in the country.

The fury underscores the gap between the India of glitzy shopping centers, conspicuous consumption and increasingly efficient service catering to a rapidly emerging middle class and the India of dusty shops, limited inventory and 5-cent shampoo packets serving hundreds of millions of poor.

It also reflects the debate over whether the world's second-most-populous country should embrace economic reform, globalization and competition, or remain true to its socialist roots, protecting small shopkeepers at the cost of innovation.

The government predicted that the move, which doesn't require parliamentary approval, would generate 10 million jobs, spur efficiency and attract much-needed foreign investment.

Under the revised rules, single-brand retailers such as Sweden's IKEA can be 100% foreign-owned while foreign retailers that sell other companies' brands, such as Wal-Mart, France's Carrefour or Britain's Tesco, are allowed 51% ownership. None of these companies have stores in India now because of the tight restrictions, although most large foreign retailers are reportedly interested.

At the main local market in South Delhi's Vasant Vihar neighborhood, grocery store owner Krishna Gupta guarded her wooden cash box with an eagle eye. As customers entered the 600-square-foot grocery store, a clerk mounted a 15-foot ladder and retrieved cans from wooden shelves built to the ceiling.

"I can't even tell you how many times a day I climb this ladder," said longtime clerk Uday Kumar, 45, slapping dust off a packet of grated coconut. "I'm sick and tired of doing the same thing."

Both said they expected the added competition would erode business, but said they would ask customers what discounts they're getting at the bigger stores and try to keep their business by knocking off a few rupees here and there. Still, they said, they're resigned to reduced profits and tougher times ahead.

Longtime customer Pavitra Vohra, 79, wandered in dressed in a green traditional salwar kameez and flowing scarf. She has traveled extensively overseas and loves the convenience, selection and lower prices of large foreign stores.

"I'm very happy about this change," she said. "More jobs will come, the economy will go up, we want foreign money to pour in. If India just sticks inside its shell, how are we going to grow?"

Nearby, in a commercial area of broken sidewalks and dangling electrical wires, co-owner Mohammed Kashif, 31, of the M.S. Sons butcher shop said he wasn't worried because customers prefer freshly killed meat, not the frozen cuts sold by big stores. Business is decent, he said, because his is the only butcher shop nearby.

Experts predict that stepped-up competition will sharply reduce the number of small retailers — the nation's second-largest employer after farming, with 35 million workers — and will pare inefficient middlemen, improve efficiency and raise farm income. By some accounts, 30% of India's fruit and vegetables spoil on their way to market in unrefrigerated trucks and in decrepit warehouses.

"Many foreign companies have been eyeing India for quite some time," said Pinakiranjan Mishra of consultant Ernst & Young India. "It's a big opportunity for Wal-Mart, for sure."

On Friday, a senior leader of the main opposition Bharatiya Janata Party told the news media that poor people would lose under the new policy. "If Wal-Mart attempts to open any shop anywhere, then I will personally burn them down," Uma Bharti said.

After operating since 2009 as a wholesaler under a joint venture with India's Bharti conglomerate, Wal-Mart can now focus on opening its own retail outlets. Raj Jain, Bharti Walmart's chief executive, declined to comment on the incendiary threat but said he didn't expect the retail industry to change rapidly, given land, regulatory and infrastructure constraints and the need to comply with state rules. "This is a slow burn," he said.

Retailers need about 30 permits to set up shop under India's notoriously bureaucratic system. Foreign players are confined to the 53 Indian cities with populations of more than 1 million and must invest at least $100 million, half of which must be in warehouses and related "back-end" infrastructure. Experts predicted that foreign big-box stores would head initially to smaller cities, gradually migrating to the outskirts of major high-cost markets such as New Delhi, Mumbai and Chennai.

mark.magnier@latimes.com

Tanvi Sharma in The Times' New Delhi bureau contributed to this report.

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