World biz and more as seen from India

Monday, July 18, 2005

May we come in, India?

Today, ManMohan Singh’s visit to the white house was the top news link on Google News (atleast when I checked). Google news algorithm is based on the popularity of a particular event. An event that lands on the top of Google news means that majorities of news websites are reporting it. So why is Indian Prime Minister’s visitor so important?

One reason is that our PM is going to ask for nuclear technology transfer, which looks highly unlikely since India is not a part of nuclear non-proliferation treaty. Apart from that, the word on the street is that Wal-Mart and other retailing giants are pushing India to open up its retail sector. Entering China was easier than setting their up shop in India. China let them in so that they could sell their cheap products to Wal-mart. But as opposed to China, India grew its economy by providing IT services and BPO, which gives India the upper hand. Wal-mart sourced only $1.5 billion from India compared to China’s $18 billion. (No wonder, a communist country opened up its doors to a capitalist company)

Another reason why getting into India is a big deal is because the numbers are ridiculously encouraging for retailers. An average Indian family spends about 44% of its income on groceries compared to 14% in US.

Another reason for the international retailers trying to gain entry is because they see a clear demand. The consumer has become aware of things available in developed countries. No matter what the source of the information is – Internet, magazines, or even bollywood – they know that they should have access to all the things that consumers in other countries have.

The India retail industry is worth US $250 billion dollars growing at 7.2% annually, now who gets the largest piece of this cake remains to be seen. Will it be Wal-mart or Big Bazaar?