Will new FDI norms force Walmart to exit India? This is what US retail giant has to say

US retail major Walmart, which invested $16 billion in Flipkart, Wednesday said it is committed to the Indian market and is optimistic despite recent changes in the FDI policy for e-commerce firms in the country.

The Bentonville-based retailing major's statement came after a recent report by global consultancy firm Morgan Stanley, which had hinted that Walmart may quit Flipkart as the new foreign direct investment (FDI) policy came into effect, which would lower its profitability in the long run.

Morgan Stanley, in a report titled 'Assessing Flipkart Risk to Walmart EPS' dated February 4, claimed that "an exit is likely, not completely out of the question, with the Indian e-commerce market becoming more complicated."

“Walmart's and Flipkart's commitment to India is deep and long term. Despite the recent changes in regulations, we remain optimistic about the country,” said Dirk Van den Berghe, Executive Vice President and Regional CEO Walmart Asia and Canada.

He further added, "We will continue to focus on serving customers, creating sustained economic growth and bringing sustainable benefits to the country, including employment generation, supporting small businesses and farmers, and growing Indian exports to Walmart's global markets."

Tightening norms for e-commerce firms having foreign investment, the government, from February 1, barred online marketplaces like Flipkart and Amazon from selling products of companies where they hold stakes and banned exclusive marketing arrangements that could influence product price.

The revised policy on FDI in online retail, issued by the commerce and industry ministry, also said that these firms have to offer equal services or facilities to all its vendors without discrimination.

Last year on August 18, Walmart had completed acquisition of 77 per cent stake in Flipkart for about USD 16 billion (Rs 1.05 lakh crore), a deal which gave the US retailer access to the Indian e-commerce market. 

Meanwhile, smaller e-commerce players like Snapdeal and ShopClues have written to the government opposing any move to extend the deadline for online marketplaces to comply with FDI rules, and urged that pressure for such relaxations need to be "resisted strongly". The position taken by these players is in contrast to that of giants like Amazon and Walmart-backed Flipkart who have sought an extension, stating that they need more time to understand the details of the framework. ShopClues said any attempts being made to portray the clarifications (under Press Note 2) as a new policy, anti-FDI or anti-consumer is "dangerously misleading and wrong".