Global retail chains put off India plans till next year

NEW DELHI - International multi-brand retail chains have all pushed their India plans to 2013, at least until after Christmas and New Year holidays, it is learnt. The September euphoria, after the Cabinet cleared up to 51 per cent FDI (foreign direct investment) in multi-brand retail, is giving way to doubt. Foreign players are expected to take critical business decisions only next year, industry sources say.

The Opposition call for a discussion and perhaps voting in Parliament on the issue of retail FDI has made international companies cagey about their plans, analysts say. That includes companies present in India across other retail formats and those weighing the option of entering the country. The fact that the world's largest retail chain, Walmart, has admitted inquiries or investigations into corrupt practices in many countries including India has complicated matters for the sector. In a separate development, the Enforcement Directorate is investigating an investment by the US chain in Bharti group to scrutinise alleged Foreign Exchange Management Act (Fema) violations.

Though the Walmart investigation is not a stand-alone probe into corruption in India, the issue is sure to provide ammunition to people against FDI, according to Arvind Singhal, chairman, Technopak Advisors, a leading retail consultancy.

“Companies are uncomfortable with the back and forth on the retail policy,” a company executive said. While last year, the government had put the retail FDI policy on hold after Cabinet clearance due to protests by some allies and the Opposition, the industry is again fearing a rollback over the demand for a Parliament debate and vote on the matter.

On whether Bharti could do a rethink on Walmart as a partner for its multi-brand business, Singhal says, “They have been partners for some years (in cash and carry) and there’s nothing about Walmart that is not known to them.”

In a statement, Walmart said the group began conducting a worldwide review of its policies, practices and internal controls for FCPA (Foreign Corrupt Practices Act) compliance in March 2011. “We have inquiries or investigations regarding allegations of potential FCPA violations in a number of foreign markets where we operate regarding FCPA allegations, including but not limited to Brazil, China and India. This is in addition to the ongoing investigation in Mexico.”

Terming the Walmart corruption investigation a “serious issue”, the BJP has demanded a probe and asked the government to reply.

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