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Wal-Mart's India stores on hold

| Thursday, Oct. 10, 2013, 12:01 a.m.

Wal-Mart Stores said Wednesday that it is splitting from its Indian business partner and cannot move forward with plans for its own retail stores in India because strict government regulations on sourcing from local small businesses make it impossible.

The announcement is a blow to Wal-Mart's expansion plans in India as well as the country's attempts to attract foreign investment in the huge but underdeveloped retail sector. Wal-Mart already runs a wholesaling joint venture in India and will continue that business, buying out partner Bharti Enterprises.

Wal-Mart did not name any other Indian partner — which would be necessary to open its own retail outlets.

Despite a potential market of 1.2 billion people, no large foreign chains have formally applied to open supermarkets and other multibrand stores in India since the government changed the law last year to allow them to invest more in the $400 billion sector previously reserved mostly for Indian companies.

The new law allows international companies to open multibrand retail stores with 51 percent ownership and an Indian minority partner. Foreign companies can operate 100 percent-owned wholesale chains.

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