Wal-Mart: Rapping On India's Door

When U.S. President George W. Bush visited India this March, a pack of American executives descended on New Delhi at the same time to take advantage of the political goodwill generated by his trip. One of the companies was Wal-Mart Stores Inc. (WMT ) The world's No. 1 retailer has long sought entry into India's 1 billion-strong consumer market, but restrictions on foreign retail chains have kept it at bay.

Wal-Mart has been sourcing goods from India since 2001. But in a sign of its bigger ambitions, Wal-Mart last December applied for permission to open a liaison office in New Delhi, to be staffed by Lance Rettig, a senior executive from international operations. Rettig's mission? Wal-Mart calls it "market research," but local retailers say it's to lobby the government to let in foreign retailers. "We are at the feasibility and market study stage," says Wal-Mart's director of international corporate affairs, Beth Keck.

Foreign retailers can only operate in India as wholesalers, and local shopkeepers want to keep it that way. Kishore Biyani, founder of Pantaloon Retail (India) Ltd., the country's top chain with some $450 million in annual revenue, has been pressing New Delhi to keep Wal-Mart out. "We are trying to close the back door and the front door," he says. If Wal-Mart does break in, Biyani won't be its only local rival. Petrochemical giant Reliance is planning an initial investment of $750 million to set up 1,000 hypermarkets. The longer it takes Wal-Mart to get clearance from Indian authorities, the better prepared its local competitors will be.

By Manjeet Kripalani in Bombay

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