NEW DELHI: India has cleared US supermarket giant Walmart of accusations it broke a ban on foreign investment in supermarkets by taking an indirect stake in a local chain, reports said yesterday.
The Indian government has been investigating a purchase by Walmart of $100m in convertible debt from the retail arm of Indian conglomerate Bharti Enterprises to see whether the US supermarket chain was seeking to circumvent curbs on foreign investment in the sector.
Walmart’s purchase of debentures had sparked accusations it was trying to get round foreign direct investment (FDI) rules as the debt could be converted into an equity stake in violation of regulations in force at that time.
But the Enforcement Directorate, a federal investigation agency, said it had found no violation of FDI guidelines by the multinational retailer under new rules, the Press Trust of India news agency reported.
“The Enforcement Directorate has found no contravention of foreign exchange laws as the government has recently amended the Foreign Exchange Management Act (FEMA) and the guidelines regulating FDI in the multi-brand retail sector,” a senior official said.
“There is no concrete basis for the agency to take forward the probe, unless otherwise there are some new directions,” the official was quoted as saying. The Wall Street Journal also carried a similar report on its website, citing an unnamed official familiar with the probe as saying there appeared to be no violation.
India last year allowed foreign supermarkets to operate in the country as part of a move to open up the economy to FDI. The probe was ordered after a communist lawmaker wrote to Prime Minister Manmohan Singh complaining about Walmart’s 2010 purchase of the convertible debentures in Cedar Support Services, the holding company through which Bharti controls Easyday, a multi-brand retail chain.