Walmart’s biggest gamble in India isn’t going down too well with some of the country’s small and medium businesses.
On May 09, the US retailer said it will acquire India’s leading online retailer Flipkart for $16 billion (Rs 1 lakh crore) in what is possibly the world’s largest e-commerce deal ever.
While this marks a milestone for India’s fledgling e-commerce sector, a chunk of small and medium businesses in the country are circumspect. They believe that this acquisition is Walmart’s attempt to circumvent foreign direct investment (FDI) rules and the American company has a “hidden agenda” of opening stores here.
“It’s an open fact that Walmart is not an online company and e-commerce is not its core competence area. Therefore, on the basis of money power a bigger game is designed to enter its goods to offline market through the way of online trade,” the Confederation of All India Traders (CAIT) said in a statement on May 16. “The government should closely monitor each passage of the deal since it’s not a merger of two companies but will have greater ramifications on retail trade and economy.”
CAIT, a trade body that represents millions of small businesses, is also concerned that Walmart’s ownership of Flipkart would give the American retailer control over large amounts of data on Indian shoppers.
CAIT is seeking legal recourse to stop the deal from going through, the statement added. “There has to be a policy for such deals otherwise in (the) lust of bigger profit several such deals will happen in future and will be a bad precedent,” it said.
India allows foreign companies to invest in e-commerce marketplaces. However, the country has restrictive policies that do not let foreign companies open wholly-owned supermarket chains. This policy restriction in India’s “multi-brand retail” trade has kept companies like Walmart and Carrefour away from the country till now.
And it is because of this policy bottleneck that, despite its interest in India for over a decade, Walmart has been forced to be a marginal player here, operating in just the wholesale business where 100% FDI is allowed.
CAIT is not the first organisation in the country to oppose the Walmart-Flipkart deal.
On May 10, the Swadeshi Jagran Manch (SJM), an affiliate of the Hindu nationalist association, Rashtriya Swayamsevak Sangh (RSS), took to the streets of New Delhi in protest. The SJM also wrote a letter to prime minister Narendra Modi opposing the deal. Then, on May 12, Tamil Nadu Vanigar Sangankalin Peramaippu, a federation of traders in the southern Indian state, warned the government of country-wide protests if the deal goes through.
Walmart has said it hopes to get all regulatory clearances for the acquisition by the end of this year, and that the deal has to close by March 09, 2019, failing which it could be terminated.
“…we believe that this partnership will be beneficial to all stakeholders and Walmart will continue to be an economic contributor,” a Walmart spokesperson told Quartz. “The partnership will create millions of jobs through (the) development of supply chains, direct farm procurement will help in increasing farmers income and take forward government’s vision of ‘Make in India’ initiative and support SME’s, among others.”