Negatives forced Wal-Mart to drop retail hopes in India

Wal-Mart, the world's largest retailer, has announced that it is exiting its retail joint venture with Bharti Enterprises to operate 20 wholesale ''cash-and-carry'' stores to sell to bulk consumers.

Wal-Mart on Wednesday announced that it had indefinitely delayed its once ambitious plans to open hundreds of own brand superstores across the country, saying prospects are currently not bright for the retailer to take the plunge.

Wal-Mart plans to buy out Bharti's 50-per cent stake in the venture, and the two companies will operate independent businesses in India.

Wal-Mart, however, has not given up all hope and is sticking to its wholesale business in India for a larger entry into the retailing sector in India at a later stage.

The retailer has been expressing its unhappiness with the government's regulations that require 30-per cent local sourcing by foreign retailers setting up base in India.

Wal-Mart also parted ways with its local partner Bharti Group saying the joint venture was ''not tenable.''

Wal-Mart Stores has retracted its India plans more because of possible government action against it for alleged lobbying and bribing of its officials, if disclosures made by the US retail giant before the US Congress indicate violation of Indian laws.

The Mukul Mudgal panel, set up to probe allegations of violation of rules by Wal-Mart in the formation of its joint venture with the Bharti Group, has recommended investigation into disclosures in the US indicating violation of Indian laws.

Wal-Mart, however, had not responded to the panel's summons and consequently, all investigations carried out by India would now have to be based on disclosures made in the US Congress.

The panel's report, submitted to the cabinet committee on economic affairs (CCEA), is now expected to be sent to Parliament.

While the announcement by Wal-Mart does not not come as a surprise, commentators say it suggested a failure of the government's efforts to lure foreign investment and thereby added to the economic gloom. It could also negatively impact the value of the Indian rupee, which has seen several lows during the current fiscal.

The Indian authorities are investigating whether Wal-Mart violated foreign investment rules by giving Bharti Retail an interest-free loan of $100 million that could later be converted into a controlling stake in the company. Both companies deny wrongdoing.

Last November, the joint venture between Wal-Mart and Bharti suspended several senior executives and delayed some store openings as part of an internal bribery investigation, one of a series of bribery investigations that have rocked Wal-Mart's international operations. In June, the joint venture replaced its chief executive.