The Indian government has denied Walmart owned Flipkart’s proposal to join the food retail business. This is a major setback for Walmart, which owns majority shares of the Indian e-commerce company. Walmart’s business in the world’s fifth-largest economy is one of the worst-hit by the global COVID-19 pandemic.
Ministry of Commerce and Industry of India told Flipkart, that its proposal to enter the food retail business does not comply with regulatory guidelines. However, The Department for Promotion of Industry and Internal trade doesn’t give any elaborate explanation over rejection.
Chief corporate affairs officer of Flipkart, Rajneesh Kumar said “At Flipkart, we believe that technology and the innovation-driven marketplace can add significant value to our country’s farmers and food processing sector by bringing value-chain efficiency and transparency. This will further aid in boosting farmers’ income and transform Indian agriculture”. He also said that the company is planning to reapply for permission.
Last year in October, Flipkart CEO Kalyan Krishnamurthy announced that firm is planning to invest 258 million US Dollars in a new venture. Flipkart is planning to invest heavily in the localised agriculture system and supply chain in the country and willing to work with lakhs of small and marginal farmers and cooperatives. Mr Krishnamurthy says “The food retail unit would help in multiplying farmers’ income and bring affordable, quality food for millions of customers across the country.”
Food and grocery are the most promising categories for e-commerce businesses to develop trust among customers in India, as it provides them with a scope to engage more and frequently with their customers. However the online food retail market in India is significantly low, but due to lockdown, this sector is rising at a great pace.
India allows 100 per cent Foreign Direct Investment(FDI) in the food retail sector. E-commerce giants like Amazon, Grofers, Big Basket, Zomato and several others have secured approval earlier. An executive of Flipkart said that they cannot say anything right now and trying to assess that on which ground their proposal was sacked.
This was a major jolt for Walmart as the company was counting on this. After most recent accounts auditing, Walmart said restricted operations at Flipkart had adversely affected the company’s overall growth. India announced one of the world’s most strict nationwide lockdown in late March which restricted E-commerce giants from delivering. They were only allowed to deliver essential items such as grocery and hygienic products.