Wal-Mart Stores, Inc., an American multinational retail corporation that runs chains of large discount department stores and warehouse stores, operates more than 10,900 retail units under 69 banners in 27 countries and e-commerce websites in 10 countries. It employ 2.2 million associates around the world — 1.3 million in the U.S. alone. Meanwhile, Bharti Enterprises Ltd is an Indian business which owns various businesses spanning across telecommunications, retail, financial services and manufacturing in 20 countries across Asia and Africa.
Wal-Mart Stores Inc. organized a partnership with its Indian retail company, Bharti Enterprises Ltd. to open its new stores in India under its wholesale venture with the partner. However, Wal-Mart had been struggling and had not opened any stores because of India’s regulations on foreign companies investing supermarket which were even eased by the government last year. Even though Indian economy needs foreign direct investment, the rules are quite hard to pass. The government relaxed the rules a little last year, but it decided not to relax them anymore because foreign companies actually can open their stores in India because of the relaxation. Particularly, India allowed 51 % foreign ownership in supermarkets, which sell multiple brands in September 2013. Before that, it did not allow foreign ownership in supermarket at all. However, Wal-Mart is not satisfied with that, and it is not going to open its store because the rules are still too strict and Wal-Mart could not find profitability there. Finally, according to The Times of India, Wal-Mart and Bharti Enterprises Ltd ended their joint venture and Wal-Mart left Indian market temporarily.
The key concept here is foreign direct investment. When it comes to foreign direct investment, host country benefits and costs, and home country benefits and costs should be considered. Host country, the United States, have benefits in balance-of-payments accounts. For the U.S., benefits are much larger than costs if Wal-Mart introduces its store in India. However, for India, the home country, it is not sure that benefits overwhelm the costs. For home country benefits, India definitely increases its inward flow of foreign earnings. Accepting FDI of Wal-Mart makes certain amount of employment opportunity. Considering about home country costs in this case, costs could be that India’s balance suffer from the initial capital outflow required to finance the FDI. Since Wal-Mart is a retail chain, it sells a lot of import products which are from China, Southeast Asian countries, or other places. It sells cheap products in India, and this makes the situation hard for Indian domestic producers. When the government of India thinks about the costs and benefits, it cannot allow more than 51% foreign ownership in supermarkets which sell many