In an extremely well-researched article in Fortune , the magazine's New Delhi staff writer John Elliott highlights the reasons why a Wal-Mart or a Tesco may find it difficult to set up shop in India.
"Even the promise of lower prices and more efficient supply chains isn't enough to offset the political power of India's 12 million shopkeepers," who account for 97% of the country's $258-billion annual retail spend, Elliott writes. Nor does it match up to "the muscle of large Indian companies that have recently realised the potential of moving into retail and are urging the government to slow down reforms that would open the sector to foreign competition."
Elliott quotes Kishore Biyani, Chairman and Managing Director, Pantaloon, owner of the Big Bazaar chain of retail stores, as saying: "Make it difficult, then the the foreigners will have to pay more. Why should we make it easy for them?" Biyani, who plans to expand the floor space of his $450-million retail empire fivefold over the next three years, is "believed by his peers to be bulking up to boost the price he can ask from a foreign joint venture partner."
Commerce Minister Kamal Nath makes it clear to Elliott that he is looking for an "incremental model that creates new jobs and does not replace or displace employment in small neighborhood shops." He then spells out a detailed plan for gradually opening the Indian market for retail giants.
For the full story, follow this link: http://money.cnn.com/magazines/fortune/fortune_archive/2006/05/15/8376903/
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