FDI in retail ~ does Walmart already has a foot inside ?

For sometime, we have been hearing this ~ that FDI in retail is bad for the Nation and that it would wipe out the local kirana walas and small time merchants…….. whether that has gotten closer is not known ~ perhaps not, at least what I would like to happen. The debate over foreign direct investment (FDI) in multi-brand retail went rather surreal and as has been got dictated by the political number battle rather than any merit or demerit on the whole issue. 

To many, it would appear though that neither  the opposition, nor the Government is speaking the truth and whether really exhibiting their intentions.  Que Sera, Sera (Whatever Will Be, Will Be) – it has made Wallmart, a household name, a larger than life image for the chain store.  Wal-Mart Stores, branded as Walmart, is an American multinational retailer corporation that runs chains of large discount department stores and warehouse stores. The company is the world's third largest public corporation, according to the Fortune Global 500 list in 2012. It is also the biggest private employer in the world with over two million employees, and is the largest retailer in the world. Walmart remains a family-owned business, as the company is controlled by the Walton family who own a 48% stake in Walmart.

The company was founded by Sam Walton in 1962, incorporated on October 31, 1969, and publicly traded on the New York Stock Exchange in 1972. It is headquartered in Bentonville, Arkansas. Walmart is also the largest grocery retailer in the United States. Walmart has 8,500 stores in 15 countries, under 55 different names.

Even as many project that the present FDI motion would pave way for entry of Walmart into India, welcomed by the Congress Govt, an interesting report that appeared in Business Standard details that the giant retail chain has already got a foot in the door of India's retail market and that after complying with India's FDI guidelines, and following all procedures.  The report suggests that Walmart Stores Inc prepared its entry into India's supermarket sector in 2010 with a $100 million investment into a consultancy with no employees, no profits and a scant $14,000 in revenue. The company, called Cedar Support Services, might have been a more obvious selection four months earlier: it began its corporate life as Bharti Retail Holdings Ltd, according to documents filed with the Registrar of Companies.

The Cedar investment is now the focus of an investigation by the country’s financial crimes watchdog into whether Walmart broke foreign direct investment rules by putting money into a retailer before the government threw open the sector to global players.  If Walmart did break the law, it could face a penalty of up to three times its initial $100 million investment.  Walmart said it was in compliance with India's foreign direct investment (FDI) guidelines, and had followed all procedures. It said the central government had sought "information and clarification", which Walmart has provided.

However, several lawyers said the transaction appeared to violate at least the spirit of India's long-standing ban on foreign investment in supermarkets, which it only lifted in September. When Walmart made the investment in 2010, it was legal for foreigners to own consultants but not retailers, so the shift in Cedar's business description raised eyebrows.  So some feel that it was complete camouflage while some feel that the way Walmart structured the transaction might make it legal.  It appears that Walmart and other retailers lobbied for years to gain access to India's market, lured by the promise of a middle class that will one day rival China's.

There are lot of murkier deals and one wonders whether such a debate and National hype was after all necessary, when things happen the way they are destined to ~ destined not by fate but by politicians.  The way the Parliament debate drama unfolded also leaves lot to be learnt by the common man – aam admi.  There were political parties which at regional level opposed FDI in retail but voted against the motion, protecting the UPA.  At some point, , Mulayam Singh Yadav was projected as a warrior and it was heard that  Samajwadi Party did not favour foreign direct investment in multi-brand retail – and yet, when it came right down to it, they would not vote against the proposal in the Lok Sabha, where the matter came up for vote on Wednesday.  So there were parties which were against the FDI-in-retail proposal, yet supported by not voting against.  The BSP too is open to criticism on the same count.

The BJP may claim a ‘moral victory’ – by pointing to the fact that during the debate on the motion to withdraw the provision for FDI in multi-brand retail, many more parties spoke out against FDI than in favour of it.  But there can be little consolation as the motion was anyway defeated.  So yet another show by Congress that they are skilled slicing and dicing the polity and coming out on top.

The common man continues to be confounded and not understanding whether he could have done anything in any manner against FDI-in-retail, which is perceived to imperil the small time traders.

With regards – S. Sampathkumar.

PS : with inputs of Business Line and the First Post.