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Walmart: Running into a brick wall

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SummaryWhen India allowed foreign retailers to own up to 51% stake in Indian multi-brand retail stores in September last year, it was widely expected that Walmart, which already had a joint venture in the cash-and-carry space with Bharti Enterprises, would be the first global retailer to enter India.

When India allowed foreign retailers to own up to 51% stake in Indian multi-brand retail stores in September last year, it was widely expected that Walmart, which already had a joint venture in the cash-and-carry space with Bharti Enterprises, would be the first global retailer to enter India.

But the mandatory requirement of sourcing 30% of manufactured goods from small and medium enterprises with an investment limit of

$1 million proved to be a stumbling block. As per senior government officials, Walmart also wanted access to smaller towns, which was restricted as per the original policy that stated that global retailers could only set up shop in cities and towns with a population of more than 10 lakh.

Following the September announcement by the government, Walmart also faced allegations of corruption. While on the one hand, it started an internal probe, on the other, senior Walmart officials kept meeting commerce ministry officials to get more clarity on the policy while seeking some relaxations.

Walmart’s efforts to seek relaxations were aided by global rivals Carrefour and Tesco. Both the global chiefs of the French and British retailers met commerce minister Anand Sharma and senior ministry officials in April this year.

After witnessing widespread demand for clarifications to the policy from almost all potential investors, in June, the commerce ministry set out a list of clarifications. The clarifications proved to be a damp squib as they restricted retailers from buying into existing retail store chains and did not touch upon the sourcing or the mandatory back-end infrastructure norms.

Frustration seemed to be growing in Walmart’s global quarters as reports have started to emerge that the largest retailer in the world may exit India altogether. The commerce ministry, after more stakeholder interactions, moved a Cabinet note in July to relax norms for foreign retailers entering India.

The changed norms were cleared by the Union Cabinet in August, but there have been no applications so far.

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