NEW DELHI (Reuters) - Sourcing of products from India by Wal-Mart Stores Inc. (WMT.N) could rise to billions of dollars annually in coming years once the U.S. retailer starts operations there, the firm’s country president said on Tuesday.
Wal-Mart and India’s Bharti Enterprises announced an equal joint venture on Monday for cash-and-carry, or wholesale, and back-end supply chain management. The tie up is scheduled to open its first store in north India by the end of 2008.
“Today Wal-Mart is sourcing over $600 million of products from India directly ... in very few items, limited to textiles, footwear and jewelry,” country president for Wal-Mart’s India operations, Raj Jain, told Reuters in an interview.
“My own view is over a period of time this will not grow in 10-15 or 20 percent but probably grow in multiples of three or four or five once we have a good relationship and understanding of the supply business.”
India’s retail industry, valued at nearly $350 billion, is forecast to double in size by 2015, with modern retail’s share of that also quickly increasing from about 3 percent now.
But multiple-brand retailers like Wal-Mart are limited to wholesale and franchise deals. Single-brand foreign retailers can take up to 51 percent in a joint venture with a local firm.
Jain said Wal-Mart is keen to enter the retail sector once foreign investment is permitted.
“Are we interested in getting into retailing when the law permits? Absolutely.”
Opening up India’s fragmented retail industry, which is dominated by family-run shops, has triggered opposition from some political parties and small shop owners, who fear massive job losses.
In May, hundreds of street vendors armed with iron rods and sticks attacked three food marts, owned by Reliance Industries Ltd. (RELI.BO), one of India’s biggest private conglomerates, blaming Reliance for taking away their customers.
More protests against the arrival of big corporations are planned for this week.
India’s main communist party, which props up the ruling coalition, has urged the government to establish a licensing system for retail chains and to prevent the entry of foreign players like Wal-Mart.
“I think a lot of Indian customers are ready for organized retail,” said Jain. “I think the real issue is making the other constituent understand, which may be the existing retailer, the wholesaler, the government bodies ... as to how it will benefit the organization of wholesaling and retail.”
India’s retail sector is forecast to more than double in size by 2015.
Bharti Wal-Mart will open 10 to 15 cash-and-carry facilities over seven years, employing about 5,000 people. A typical store should occupy 50,000-100,000 sq. ft., dwarfing the average Indian store of about 200 sq. ft.
“I think India is going to be a very important part of global strategy for the next 50 years and our perspective on India is in that time frame,” Jain said.