Reuters Examines How Wal-Mart, Now Under Scrutiny, Gained Foothold in India

Reuters today takes a look at how Wal-Mart Stores Inc. of Bentonville got a foothold in India's fast-growing retail market and whether the world's largest retailer broke the country's foreign direct investment rules.

As we've noted, Indian regulators have been taking a hard look at Wal-Mart's $100 billion deal with Bharti Retail, which operates more than 200 supermarkets in India. And in November, Wal-Mart's Indian joint venture announced that it had suspended several employees as part of its internal corruption investigation.

In its reporting today, Reuters looks at the origins of Bharti Retail, a related web of companies, Indians laws about foreign investment, and the local politics surrounding everything:

Bharti and Walmart both declined to provide additional details on how the transaction was structured.

Senior government officials said that India’s central bank had asked the Enforcement Directorate, which investigates financial crimes, to look into whether Walmart violated the law by investing in a supermarket retailer before foreign investment rules were relaxed.

If Walmart did break the law, it could face a penalty of up to three times its initial $100m investment, they said.

That would not only be a setback for Walmart, it would also weaken consensus-building efforts by India’s minority government, led by the Congress Party. The party is desperate for more support from across the political spectrum after its decision to let foreign players into India’s retail market came under fire from the opposition and even some of its own allies.

Reuters' full report is available here.