Walmart faces fresh trouble as it seeks to expand into India

Walmart faces fresh trouble as it seeks further expansion into the Indian market. The retail giant is under investigation following claims that it broke foreign exchange rules when it invested US$100 million in a unit of its Indian joint-venture partner.

In September, Indian Prime Minister Manmohan Singh announced a slew of financial reforms, which included permitting foreign investors to hold up to 51 per cent in multi-brand retail concerns.

However, it has now been alleged that the world's largest retailer, Walmart, bought a stake in Bharti Enterprises before that particular reform came into existence.

Allegations focus on the fact that Walmart's investment in a domestic unit of its wholesale joint-venture partner came through debentures, a type of bond issued by a corporation to secure capital. Walmart allegedly issued the debentures so that they could later be converted to an equity stake.

The Enforcement Directorate, an elite agency within the Finance Ministry, is looking into the claim, first made by a member of the Communist Party of India.

Anand Sharma, India's commerce minister, said: "Allegations are allegations. In a rule-based and rule-governed country, if there is any violation, there are agencies and authorities who have the freedom to look into that. I shall not comment on the alleged FEMA (Foreign Exchange Management Act) violations which have yet to be looked into."

The Indian government's resolution to liberalise its retail, and several other sectors has been met with fierce and repeated criticism.

The Trinamool Congress party (TMC), a key ally of the ruling United Progressive Alliance (UPA), quit the coalition over its stance against the decision to liberalise the retail sector.

Speculation abounds that when the winter session of parliament begins on Thursday, the TMC, led by Mamata Banerjee - the Chief Minister of West Bengal state, will try to bring a no-confidence motion against the government.

Balbir Punj, spokesperson of Bharatiya Janata Party, said: "We have all options open, we will coordinate with every political party which is ready to resist the anti-people policies of this government. And we will definitely coordinate with Mamata Banerjee and we welcome her initiative."

Whether or not the no-confidence motion is introduced, the government will have to put up a strong defence of its reform policies. This will be a tough task, particularly due to the fact that it is already under a lot of pressure over corruption scandals.


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