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Business News/ Opinion / Online Views/  What went wrong with Wal-Mart in India
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What went wrong with Wal-Mart in India

The story of Wal-Mart’s ill-fated Indian sojourn that culminated in the exit of Raj Jain belongs in the 1990s, not 2013

Ambiguous regulations, a nervous government, corporate rivalry, a CEO in a rush, and some good old-fashioned myopia of the type common among multinationals in the 1990s seem to have put paid to Wal-Mart’s Indian plans. Photo: Bloomberg (Bloomberg )Premium
Ambiguous regulations, a nervous government, corporate rivalry, a CEO in a rush, and some good old-fashioned myopia of the type common among multinationals in the 1990s seem to have put paid to Wal-Mart’s Indian plans. Photo: Bloomberg
(Bloomberg )

The story of Wal-Mart Stores Inc.’s ill-fated Indian sojourn that culminated in the exit of Raj Jain, CEO of the Indian operations, belongs in the 1990s, not 2013.

Ambiguous regulations, a nervous government, corporate rivalry, a CEO in a rush, and some good old-fashioned myopia of the type common among multinationals in the 1990s seem to have put paid (if only temporarily) to the Indian plans of the world’s largest retailer.

It would have been fine if the company had waited for the Indian government to allow foreign direct investment (up to 51%) in multi-brand retail (or supermarkets and the like that sell multiple brands). That happened in September 2012 (with several caveats, including one on the state governments having the ultimate say in this).

Rather than do this though, the company chose to go by a government clarification (termed a press note) that effectively allowed existing foreign investment limits in multi-brand retail to be breached. Before the government could notify this press note, however, a rival of Wal-Mart’s Indian partner Bharti leaked the details to the media and some members of Parliament. The government responded by going into freeze-mode regarding the notification. The matter is now being investigated by the Enforcement Directorate.

Soon after, in November 2012, the US retailer announced that it was suspending the CFO of the Indian operation and a few other executives even as it carried out an investigation on whether these individuals had violated US anti-bribery laws.

This and and a subsequent revelation by the company of the amount it had spent on lobbying (in the US) regarding its international expansion only made matters worse in India. Rather than explain that the latter dealt with lobbying with US lawmakers and not Indian ones, India’s government, reeling under the after-effects of several corruption scandals, took the easy way out and sought to assuage its rivals by announcing a probe into the issue.

Meanwhile, fortunately for the company, politicians baying for its blood seemed to have forgotten the more relevant issue regarding the suspension of the CFO and others.

Still, by then it was clear to most people that Wal-Mart’s missteps in India had made it a lightning rod for everything related to the entry of ‘Big Retail’ into the country. The team Jain had put together started coming apart. And Wednesday’s announcement regarding his own exit was, in many ways, preordained.

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Published: 26 Jun 2013, 01:34 PM IST
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