The government announced an inquiry into lobbying practices by Wal-Mart Stores Inc on Wednesday after a report that the giant retailer had pressed U.S. lawmakers to help gain access to foreign markets.
Wal-Mart disclosed in a report to the U.S. Senate that it had paid $25 million over four years to lobby American lawmakers to help gain access to overseas markets, including India.
The report spurred opposition lawmakers, who oppose Wal-Mart's entry into India, to call for an inquiry into whether any money was spent in India, even though the disclosure filing only referred to lobbying activities in the United States.
Parliamentary Affairs Minister Kamal Nath told parliament a retired judge would be appointed to lead an investigation "pertaining to Wal-Mart's lobbying".
No further details were available about the inquiry.
Government officials have said privately there is nothing to investigate since Wal-Mart's lobbying activities in the United States were not illegal.
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Wal-Mart has said allegations that a routine U.S. lobbying disclosure form reflects improper conduct on their part in India is false.
"This disclosure has nothing to do with political or governmental contacts with India government officials," said a Bharti Walmart spokesperson.
"It shows that our business interest in India was discussed with U.S. government officials along with 50 or more other topics during a three-month period."
All organisations which expend more than $11,500 annually on lobbying activities and employ at least one lobbyist must register and file the quarterly reports, the spokesperson added.
The government wants to resolve the matter as quickly as possible so that parliament can pass important financial bills before the winter session ends on December 20.
Wal-Mart has found itself entangled in a fight between Prime Minister Manmohan Singh's fragile minority government and political opponents determined to thwart supermarket reform which, they say, will destroy the livelihoods of millions of small store owners.
Opposition parties have sought to portray Singh's government as the pawn of powerful foreign companies ahead of national elections due in 2014.
Bentonville, Arkansas-based Wal-Mart has been the most active among foreign supermarket operators keen to push their way into India's $450 billion retail market.