Thanksgiving: US retail giants promise to create jobs in India

New York: American retail giants woke up on Thursday morning to learn that India had unlocked the door for global retailers . It was the best Thanksgiving Day holiday gift they could have asked for as Americans marked the annual holiday, a centuries-old harvest time tradition.

After millions of Americans are done with their turkey dinners on Thursday, they will head to stores to get a jump-start on “Black Friday”, the single biggest shopping day of the year, which sets the tone for the entire Christmas shopping season in America and Canada.

[caption id=“attachment_139939” align=“alignleft” width=“380” caption=“With foreign players ready to enter India, there is hope new jobs would be created. Reuters”]  [/caption]

You can now expect the Americanisation of the retail trade in India and perhaps even enjoy “Black Friday” sales and deep discounts on Diwali next year. Wal-Marts are to quickly take root across India, as the cabinet paves the way for international supermarkets and department stores to establish joint ventures. The world’s biggest retailers are salivating at the prospect of entering one of the last great consumer markets that had been off-limits to them until Thursday’s policy U-turn.

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“This change in policy is a good start to a win-win decision for all stakeholders, including customers, farmers and the government. Through our participation in front-end retail, we look forward to playing a role in India’s success story by contributing to the economy and helping Indians save money,” said Doug McMillon, president and chief executive of Wal-Mart International.

Many in India fear that giving companies like Wal-Mart unfettered access will ruin millions of Indian family-run shops, but the US retail giant held out the promise of jobs.

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“We will create thousands of jobs through inclusive growth, increase farm productivity and income and help small and medium industries prosper and grow with us,” said McMillion. “We’re confident that the government, after seeing the value we bring to India and its people, will view this opening as a first step in further liberalising FDI in retail.”

Previously, retailers such as Wal-Mart were permitted to establish only wholesale joint ventures. Now, they will be able, with an Indian partner, to open supermarkets. Wal-Mart opened its first wholesale outlet on May 30, 2009 with Bharti Enterprises. Wal-Mart, which has been in India for over three years now, is expected to be one of the first to make a move.

“We have a good relationship with Bharti in the back-end. It is only natural that we will carry this to the front-end,” Raj Jain, head of Bharti-Walmart India, told The Economic Times. The US firm can use the same supply chain that it has set up to expand its business in India and also get access to Bharti’s Easy Day stores.

“Allowing foreign investment in retail would be good news for Indian consumers and businesses, and we await further details on any conditions,” said a Tesco spokesman. Tesco PLC has a franchise agreement with Tata Group’s Star Bazaar stores.

Some analysts say fears that Wal-Marts will gobble _kirana_ stores are overblown as consumption and demand are growing faster than the organised or unorganised retail trade can keep pace with. They argue that increasing foreign participation in retail will deepen the pool of long-term investment in infrastructure, boosting growth without adding to India’s onerous fiscal deficit.

“More broadly, the move signals that the Indian government, after years of prevaricating over allowing greater foreign investment in several sectors, is now serious about attracting overseas funds,” said The Wall Street Journal.

“The singular act of opening the multi-brand retail sector to foreign direct investment will benefit the Indian consumer by spurring the modernisation of India’s vast agri-retail marketplace,” said Ron Somers, president of the US-India Business Council (USIBC).

Somers, who engaged lobbying firm Patton Boggs with a billing rate of $495 an hour to lobby lawmakers in Washington to push the India-US civilian nuclear energy deal, was optimistic that the move would fight food inflation; “Investments will now flow into India’s farm-to-market supply chain, which will bring efficiencies to India’s supply chain infrastructure. Food price-rise and inflation will now effectively be tamed.”

In the days ahead, India might add caveats to the new opening: foreign investors may have to invest $100 million to set up multi-brand retail operations, and $50 million of that may have to be invested in back-end operations such as food-processing units and warehouses.

Kishore Biyani, founder and chief executive of India’s largest retailer, the Future Group, told the Press Trust of India , that is a “win-win situation for everyone” because the money to be invested in back-end operations, as well as supply chain, among other things, would help Indian farmers get their produce to the markets efficiently.

The government also changed the rules to allow single-brand retailers such as Gap and Adidas to own 100 percent of their Indian businesses. Earlier, they were permitted to own only 51 percent of a partnership with an Indian company.