Bangalore: Wal-Mart has ended its joint venture with Indian conglomerate Bharti Enterprises and has decided to take separate ways for operations in the Indian retail sector. This recent move may further spook foreign investors over certain issues, reports Live Mint.
According to Analysts, many foreign investors are worried about issues like pervasive corruption, red tape, stop-start efforts to open up Asia’s third-largest economy, tax battles, decade-low growth and a weak currency.
Looking at the Foreign Direct Investment rules, the world’s biggest retailer, Wal-Mart has called off the partnership with Bharti Enterprises, which had the potential market of1.2 billion shoppers.
The harsh regulations from firms outside India include a requirement to source 30 percent of goods from small industry. This could be a deal-breaker for Wal-Mart, because it said that the goal was impossible to meet.
“From a destination perspective, foreign firms want to be in India. But from a policy and doing-business perspective, it’s different. The government needs to make this country investment-friendly. So far it’s been pure posturing,” said Saloni Nangia, president of management consultancy firm Technopak.
She further added that, “It can be mismatched expectations to blame, disappointing returns, government vacillation on implementing policies, legal and regulatory concerns, ambiguities about what can be achieved—sometimes a mix of elements.”
The issue has become increasingly crucial, especially in the US, where laws like the Foreign Corrupt Practices Act are making it tougher for India to absorb foreign direct investment (FDI).
“Corruption is one of the most significant challenges adversely affecting the Indian economy,” Toby Latta, head of Control Risks in Asia-Pacific, told AFP.
According to U.S. engine maker Navistar International’s president, Troy Clarke, Indian market has not expanded as people originally expected it to be.
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