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Acquisition of Flipkart by Walmart
The recent acquisition of Flipkart by Walmart will accelerate the process of transforming the retail sector in two important ways. It will bring in the know-how and capital of a retail giant, and will give a boost to online retail. While this helps transform the retail sector in India with clear long-run benefits, definite job losses in informal retail and probable rises in food prices in rural markets due to sourcing by big retailers are the short-run problems. If the government ignores the short-run problems, the transformation may become politically infeasible.
The recent acquisition of Flipkart by giant retailer Walmart is an important event for the Indian economic scenario for at least two reasons. First, it suggests a possible change in the structure of retail business in India, which, according to a Parliamentary Committee Report of 2009, constitutes 10% of the Indian national income. Second, entry of Walmart to e-commerce is likely to have an effect on retail trade through the net, a practice becoming increasingly popular among Indian consumers.
But, before we elaborate on these effects, it is necessary to look at the basic facts. Walmart, the United States (US) retail titan, has picked up a 77% stake in Flipkart, the largest online retailer in India. The deal was concluded for $16 billion and Walmart plans to put in $2 billion more as fresh investment. Through the acquisition, Walmart will not only make an entry to the Indian retail market but will enhance its position in the world market of multi-brand e-commerce as well.
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