India Reforms Suffer With Wal-Mart’s Retreat

It was the change that was supposed to demonstrate India’s government was serious about reform after years of missteps: Defying critics in their own coalition as well as the opposition party, Prime Minister Manmohan Singh and his new economic team, led by well-respected Finance Minister Palaniappan Chidambaram, in August successfully opened the country’s retail market to foreign companies including Wal-Mart Stores and Tesco.

Instead, the policy has turned into the latest embarrassment for the beleaguered government struggling to revive a stalled economy. Despite the ballyhooed opening of the market, no major foreign retailer has made a move to take advantage of the liberalized rules. Indeed, the movement now is in the other direction: Wal-Mart is parting ways with the Indian company that was supposed to help the American giant penetrate India. Wal-Mart is discontinuing its five-year-old franchise agreement with Bharti Enterprises, the Indian conglomerate that operates 200 superstores, the two companies said in a statement issued yesterday. Wal-Mart will also buy out Bharti’s stake in the companies’ 20 wholesale outlets in the country.