India to Wal-Mart, Other Foreign Investors: Come On In
In an attempt to improve its credibility and reduce corruption, the Indian government has introducing huge reforms making it easier for foreign big-box stores and other companies to invest in and help grow the economy.
India recently announced reforms that will allow up to 51 percent of federal direct investment (FDI) in local ventures by foreign big-box chains like Wal-Mart. It also eased regulations for single-brand foreign companies like IKEA, as well as domestic airlines, broadcasting, and other industries. However, rather than applying the changes nationwide, the government decided to let each individual Indian state decide whether to use them, which some consider a good idea politically since many states have resisted both FDI and central government suggestions. Some states, such as Punjab and Rajasthan, are already working with Wal-Mart on joint ventures.
What’s the Big Idea?
Corruption at many levels is believed to be one reason why India’s economic growth has dropped from 10 to 6 percent in the past three years. One executive describes the benefits of the reforms when it comes to the inefficient food industry: “Federal direct investment is needed to allow India’s $450 billion retail market, of which only 6 percent is organized, to grow over time. Introducing logistics, supply chain, and cold storage expertise and investment are critical to reducing the criminal levels of wastage in the farm-to-fork chain.”
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