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Finally, Wal-Mart to set up 100% arm in India
By siliconindia staff writer
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Friday, 01 October 2004, 19:30 IST
NEW DELHI: Wal-Mart has finally done it. Exactly a year after its top team came knocking on IndiaÂ’s doors to shop for goods worth billions of dollars, the worldÂ’s largest corporation is setting up a wholly-owned subsidiary in India for product sourcing services, reports Economic Times.
The proposed Indian subsidiary will also conduct quality checks on products and carry out factory inspections and certifications.
So far, Wal-Mart had been operating through a liaison office in Bangalore, which acted as a communication channel between Indian companies and a Wal-Mart group company. It was only late last year that Wal-Mart formally showed interest in sourcing goods worth billions from India, provided Indian companies deliver quality products on time and, of course, at competitive prices.
A high-level team had held talks with commerce ministry officials and the apex chamber, CII. The current decision to set up a subsidiary might reflect the multinationalÂ’s strategy to step up sourcing from India. The development also indicates Wal-MartÂ’s increased commitment to India.
Wal-Mart and other US and European retailers are looking at expanding the sourcing base from India, as the restriction on textile exports is set to go from January 1, Â’05. Wal-Mart has expanded the Indian basket beyond jewellery to include textile, apparel and kitchen utensils.
They also seem to be interested in categories such as marine products like shrimps, OTC pharma products, spices, linen, accessories, garments, home furnishing, seasonal items, electrical appliances and Indian food-items .
Besides the cost-benefit factor that India offers, Wal-Mart wants to spread its risk by not being too dependent on China. In Â’02, it imported $12bn worth of goods from China, accounting for one-tenth of American imports from that country; Wal-MartÂ’s imports from India are estimated at $1bn.
As manufacturers here have limited exposure to Wal-Mart, India will be among several sourcing bases that the behemoth will be looking at. Wal-Mart plans to invest in the Indian sourcing subsidiary via Wal-Mart Global Sourcing (WMGS) Singapore and WMGS Services.
The latter is a wholly-owned subsidiary of Wal-Mart Stores and has had a liaison office in India since September Â’01 which acts as channel between Indian companies and WMGS Services.