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India Opens Up to Starbucks, But Not Walmart

Starbucks may be scaling back its empire in the United States, but overseas it’s expanding into a new market: India. On Friday the company opened a store in Mumbai, its first in the country. The store is a joint venture with Indian conglomerate Tata and will soon be joined by more, according to the Associated Press:

The company won’t comment on expansion targets, but [Chief Executive] Schultz pointed to Starbucks’ presence in other markets as examples of the scale he is interested in. There are more than 700 outlets in mainland China, he said, and 1,000 in Japan. While those numbers are dwarfed by the over 10,000 outlets in the United States, Asia has emerged as a key driver of growth.

“Asia and the entire Pacific Rim present one of the most significant growth opportunities within Starbucks Coffee Company,” Schultz said. “India is at the core, along with China.”

Another marquee American brand is having less luck. Walmart is now under investigation for violations of India’s exceedingly complicated laws on foreign direct investment (FDI). Although the Indian government recently opened its retail industry to FDI, Walmart is under scrutiny for investments made before the rules were changed. The FT reports:

The commerce ministry last week asked the Reserve Bank of India to investigate allegations that the US retailer “clandestinely and illegally invested” $100m in an Indian chain of convenience stores and hypermarkets, according to documents obtained by the Financial Times.

The Easyday stores are owned by Bharti Enterprises, Walmart’s partner, though the US group in effect manages them with some executives seconded to Bharti.

One MP has already called for Walmart to be banned from the country, echoing protests earlier this year following the announcement that India would allow FDI in retail. Many in the country are worried that Indian retailers will lose business to retail giants.

The contrast between these two companies underscores how India’s byzantine business regulations and investment rules are continuing to stifle the development of a stronger economy. Foreign investment can bring jobs, technology, and improved management practices that would be extremely helpful in a country that struggles at times to keep things running smoothly. Situations like this are more likely to scare investors away than encourage them.

For India to advance, it will need to continue to open up, and not just to Orange Mocha Frappucinos.

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