India rejects Wal-Mart’s Flipkart request to start food retail business

Media reported that the Indian government had just rejected an application by Flipkart, the country’s online retail giant, to enter the food retail sector. Because the proposed FarmerMart is not allowed 100% foreign direct investment, Wal-Mart completed its acquisition of Flipkart a few years ago (with a majority stake). The Ministry of Industry and Internal Trade Promotion (DPIIT), part of the Ministry of Commerce and Industry of India, said Flipkart’s proposed program for farmerMart’s food retail business violated relevant regulatory guidelines.

India rejects Wal-Mart's Flipkart request to start food retail business

Even so, Rajneesh Kumar, Flipkart’s chief corporate affairs officer, said in an interview withmedia that the company was evaluating the agency’s response and intended to reiterate the filing.

We believe that in technology and innovation-led markets, value can be created by value chain efficiency and transparency for Indian farmers and the food processing industry, while helping to further increase farmers’ incomes and transform Indian agriculture.

Announcing plans to enter the country’s growing food retail market, Flipkart Group chief executive Kalyan Krishnamurthy also said in October that the company planned to invest $258 million in new joint ventures.

In addition to Flipkart, there are a number of e-commerce and video grocery companies competing fiercely in India’s emerging markets, including Amazon, Zomato and Grofers.

In addition, Research Firm Forrester says India’s online food and grocery market is still small, accounting for only 1% of overall sales.

However, after re-examining policy guidelines, the Indian government has made clear that food retailing, like other e-commerce industries, allows only third-party sellers to interact with buyers rather than hoard their own inventory, while increasing the limit on non-direct 100% investment by foreign investors.

On a recent quarterly revenue conference call, Wal-Mart said Flipkart’s limited operations have had a negative impact on the group’s overall growth. This was especially after India announced strict city-blocking controls in late March to control the spread of the disease.