Wal-Mart Stores moved closer Monday to cracking open one of the last and potentially most lucrative frontiers for giant Western retailers, announcing a joint venture with an Indian partner.

Wal-Mart, the world's biggest retailer, plans to open "hundreds" of Wal-Mart- branded superstores across India in five years starting in 2007, working with Bharti Enterprises, a company that runs the leading Indian cellphone operator, said the Bharti chairman, Sunil Mittal.

The deal would be the first large-scale entry into the booming Indian market by a foreign multibrand retailer. Companies like Wal-Mart and Carrefour, the French retailer, have long been stymied by Indian government rules that critics feel are protectionist.

"It is the last and a very big frontier," Mittal said during an interview at the World Economic Forum conference in New Delhi. "Brazil is done. China is done. This is the last Shangri-La of retail. Where will Tesco or Wal-Mart get their growth? Here." Tesco ended talks last week with Bharti on a similar deal.

Mittal, who is not related to the Mittal family of steel-making fame, said that the companies would invest "whatever it takes." He did not give specific figures. The first would open Aug. 15, 2007, India Independence Day, he said.

The deal sets the stage for a tough battle between the traditions of the 12 million family-run shops in India and big Western retailers, which are eager to tap India's growing middle classes.

"It is a defining moment for India's retail industry," said Kishore Biyani, chief executive of the leading Indian retail company, Future Group. Biyani, whose group runs more than 200 stores, said he and his colleagues were closely watching the strategy of the new venture.

Wal-Mart has stumbled recently in some of its overseas markets, in part by misjudging local tastes. It said this year that it would pull out of South Korea and Germany. Bharti has no experience in supermarkets, but it is well known in India as a market leader in cellphone service through Bharti Airtel.

"Bharti and Wal-Mart make a formidable combination," said Arvind Singhal, chairman of KSA Technopak, a retail consultancy based in New Delhi.

The Indian retail industry remains largely closed to foreign capital, owing to fear that Western retailers will cost mom-and-pop shops their livelihoods.

But Wal-Mart found two loopholes: Foreign retailers can operate via franchisees and they can invest their own capital in wholesale shops, like the German retailer Metro has done. Mittal said that Wal-Mart would open franchise stores owned by Bharti while investing its own money in wholesale outlets.

Wal-Mart, with backing from Washington, has lobbied aggressively to pry open a market where just 3 percent of consumers shop in large-format, Western-style stores. That compares with 20 percent in China, 30 percent in Indonesia and 40 percent in Thailand, according to KSA Technopak.

Foes of Wal-Mart's large-scale operations decried its entry and said that the ranks of the jobless would rise and that pollution would increase as shoppers drive to stores instead of receiving home-delivered produce.

"The entry of Wal-Mart will be like an economic tsunami in terms of its destructive impact," said Vandana Shiva, an environmental campaigner who runs an organic food business. "Because of the nature of what Wal-Mart does, it will affect the people who grow food, the people who eat it and the people who sell it."

Small retailers have resisted government-led attempts to organize the sector and make way for chains. Recently, a court-ordered shutdown of more than 30,000 illegal shops in New Delhi neighborhoods met with violent protests.

Yet steps are being made toward change. In January, the government allowed international companies to set up single-brand retail chains and hold up to a 51 percent stake in them.

Last month, the largest private-sector Indian company, the petrochemicals giant Reliance Industries, opened the first of 5,500 planned retail stores, in the southern Indian city of Hyderabad.

The Indian retail industry is expected to grow by 2015 to $637 billion from $300 billion now. The share of large-format retail is expected to grow in five years to 18 percent from 3 percent.

Based on those numbers, industry experts argue that the leading players in Indian retail could each count on $10 billion to $50 billion in annual revenue within a decade. Such numbers are beginning to draw even big-league players like Wal-Mart, which reported $315 billion in revenue last year.

Wal-Mart already has a sourcing operation in India, but it long has argued to Indian officials that, were it allowed to sell in the country as well as buy, it would use its inventory and logistics expertise to help spread prosperity by creating new markets for farmers.

Saritha Rai reported from Bangalore.

© 2006 The International Herald Tribune

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