Wednesday, December 7, 2011

Wal-Mart and Foreign Retail Barred from India. Foreign Direct Investment Stalled. Is this Best for the Population?

Wal-Mart (NYSE: WMT) and other multinational retailers have been forced to wait even longer to enter the Indian marketplace.

Just last month, the Indian government announced plans to allow foreign retailers the option to own up to 51 percent of local supermarkets in major cities. This was seen by foreign companies as a positive sign of further international growth opportunities in the midst of slowing business and consumer activity in their home markets.

The government initially believed that more foreign competition and investment would result in lower prices for consumers and increased investment in infrastructure development in the country. However, government opposition parties and protesters declared that the expansion of foreign retailers in India would hurt small business and independent family owned retailers.

With the Indian economy slowing, and foreign direct investment in the country declining, many observers have suggested that India needs more foreign capital in order to help rectify a current account deficit.

To be sure, the Indian economy might benefit from increased levels of foreign direct investment, but there is definitely something positive to be drawn from the fact that Indian lawmakers are actually considering whether or not foreign domination of the retail sector will actually be the best thing for the local populations.

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