Wal-Mart eyes increased sourcing from India

Chandigarh, India Wal-Mart Stores said it is looking to export products worth hundreds of millions of dollars from India as the retailer wants to make the country a major sourcing hub, according to a Tuesday report by the Wall Street Journal.

The CEO of Wal-Mart’s Asian operations, Scott Price, said the company wouldn’t yet provide any specific export targets, as it is still "early days."

Price was in the northern Indian city of Chandigarh for the opening of the second wholesale store of Bharti Wal-Mart Pvt. Ltd., the Wal-Mart Stores’ joint venture with Bharti Enterprises Ltd.

India is an important country for Wal-Mart for sourcing materials, due to cost advantages and because of the growth potential it offers when the markets in the developed world, including at home, are saturated. Only a small portion of India's retail market is organized at present, leaving huge space for expansion, according to the WSJ report.

But, the law governing India's retail sector is an obstacle. The country allows multi-brand retailers such as Wal-Mart to operate only wholesale outlets and provide back-end support to local operators.

Single-brand retailers, however, can make up to 51% foreign direct investment in their ventures.

Price said he hoped the Indian government would allow foreign direct investment in multi-brand retail soon. "There is an increasing realization in the government that more investment in retail will help," he said. "We are very hopeful that the government is considering and understanding the need to open FDI in retail."

Raj Jain, managing director and CEO of Bharti Wal-Mart, said the companies "will like to be equal partners" if India relaxes rules and allows Wal-Mart to invest in Bharti Retail, which caters to retail customers.

Jain said he is confident of opening 10-15 stores in two-three years.

The company had in May said it would open 15 wholesale stores in three years with an investment of up to $7 million in each. Jain said he expects it to open five of these stores in northern India in the current financial year that began April 1.

He said also the company was on track to achieve its target of employing 5,000 local people within three years of opening its first store.