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updated: 9/21/2012 11:08 AM

Wal-Mart to open Indian stores in 12-18 months

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Associated Press

MUMBAI, India -- Wal-Mart plans to open retail outlets in India in the next 12 months to 18 months, the company said Friday, making it the first multinational to jump on the government's decision to open the country's huge retail market to foreign players.

Raj Jain, the managing director of Bharti Wal-Mart, a joint venture that operates 17 wholesale shops in India, confirmed by email that Wal-Mart plans to open direct to consumer stores over the next 18 months, but declined to say how many.

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India announced last week that it would allow foreign firms to take a majority stake in multi-brand stores for the first time. The surprise decision cheered investors but cost the ruling Congress Party an important coalition ally.

New Delhi first tried to enact the measure last year, but backed down in the face of resistance from coalition partners, badly damaging its credibility with global investors. Prior to the reversal, foreign retailers like Wal-Mart could only operate wholesale outlets.

Opponents say the move will cost Indians jobs and decimate millions of mom-and-pop shops. Advocates say welcoming players like Wal-Mart is necessary to attract the investment needed for India to modernize its food supply chains, reduce waste and bring down spiraling food prices.

Under the new rules, individual states will have the right to decide whether to let the retailers operate from their territory. Only 10 of India's 35 states and territories which are controlled by the ruling Congress Party are likely to welcome foreign retailers initially, according to Eurasia Group analyst David Sloan.

The rules also mandate that foreign retailers spend half their investment on building supply chain infrastructure and source 30 percent of manufactured goods from local small- and medium-sized companies. Foreign retailers are also restricted to India's 53 cities with populations exceeding 1 million.

India's rules are more restrictive than those of China, Thailand, Russia, Brazil and Indonesia, all of which allow foreign investors 100 percent ownership in retail, according to Goldman Sachs.

British-based Tesco PLC and French retailer Carrefour have also expressed interest in expanding in India.

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