Walmart Stores has said that it would be splitting from its Indian business partner and cannot move forward with plans for its own retail stores in India due to strict government regulations on sourcing from local small businesses.
The move, announced on Wednesday by the world's largest retailer, is a blow to Walmart's expansion plans in India as well as the country's attempts to attract foreign investment in the huge but underdeveloped retail sector.
Walmart already runs a wholesaling joint venture in India and will continue that business, buying out partner Bharti Enterprises.
In a joint statement on Wednesday, Walmart and Bharti Enterprises confirmed they would dissolve the partnership.
Walmart will buy Bharti's stake in the Best Price Modern Wholesale cash and carry business that has at least 20 stores across India and continue to operate it in India. Bharti will take 100 percent ownership of the retailing joint venture Easyday.
"Bharti is committed to building a world-class retail venture and will continue to invest in Bharti Retail across all formats," said Rajan Bharti Mittal, Bharti's managing director. "We believe that with our current footprint of 212 stores, we have a strong platform."
Walmart did not name any other Indian partner - which would be necessary to open its own retail outlets - and comments from its top Asia executive indicated that plans to open its consumer superstores are indefinitely on hold because of government regulations.
Bentonville, Arkansas-based Walmart has long had trouble with its joint venture with Bharti Enterprises, and rumors of an impending split have been rife for months.
In June, Bharti-Walmart's CEO quit and was replaced. In November, the company suspended several workers as part of an internal corruption investigation.