India is seeing a “gold rush” in its fledgling retail industry, according to the head of telecoms giant Bharti Enterprises, which is developing a local joint venture with US giant Wal-Mart.
Bharti Enterprises, a local conglomerate, has until now made its money in telecoms, agri-business and insurance.
Managing director Rajan Bharti Mittal said the company had decided to enter retail due to the purchasing power of India’s burgeoning urban middle class and young population.
“India is ready for the retail experience and we must realise that India is a country with a young population; there are 720m people below 35 years of age,” Mittal told the World Retail Congress in Barcelona today (10 April). “There is a gold rush in Indian retailing – good, bad or indifferent, that’s where it is heading to.”
Bharti is busy building the wholesale cash-and-carry business it set up with Wal-Mart last August. The venture, Bharti Wal-Mart Private Limited, will serve fruit and vegetable resellers, restaurants and kirana stores. Wal-Mart and Bharti will each hold a 50% stake in the venture.
Mittal said both Bharti and Wal-Mart brought something unique to the partnership. “We understand the Indian consumer and we understand the Indian environment and we have got partners who understand the entire retailing science and art. This is a partnership of choice.”
He forecast that Bharti’s retail business could, in the next “five to seven years”, reach the size of its telecoms operations, which is worth some US$10bn.
Nevertheless, despite Mittal’s optimism about the Indian retail scene, there has been fierce political opposition to the growth of organised retail in the country – with domestically owned retail groups like Reliance Retail not immune to the hostility and criticised for expanding.
Some state governments have forced the closure of stores after protests from smaller traders who fear that the growth of large retailers could damage their livelihoods.
Mittal insisted that opposition would fade as organised retail’s “many benefits” emerge.
“I am very convinced that all will have a place in the market to co-exist. India will find its own model and it will be a co-existence and inclusive model,” he said. “You will see that opposition diluted as the Indian political leadership sees the fruits of success of [organised retail] and that it benefits the people at large.”
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