Now we know why the government puts in place riders like the 30% local sourcing norm for foreign investors in organised retail in India : these come in handy as ready excuses for exiting an impossible, adverse situation.Laws like the Foreign Corrupt Practices Act of the US are increasingly making it difficult for India to absorb foreign direct investment. In India, where the political system is financed almost exclusively by the proceeds of corruption , facilitated by civil servants who are suborned in the process, no company can operate without greasing a palm here or shelling out unaccounted amounts there for purchasing real estate.If an Indian company that follows the philosophy that “we’re like this only” partners a foreign company mandated to neither be corrupt nor associate with corrupt practices, both parties can be in trouble. The best solution is to annul the marriage. As Bharti and Wal-Mart have. There’s another reason why it does not make sense for a back-end aggregator like Wal-Mart to partner an Indian company.The real value in organised retail lies in creating efficiency gains via scale and better logistics, and passing on some of the gains to the end-consumer in the form of cheaper products while retaining the rest along with the large volumes of thin margins in retail sales. How much of value is retained in the cash-and-carry back-end of the business and how much realised from retail is a function of competition.India’s investment rules — 100% FDI in cash-and-carry but only 51% in retail — interfere with this logic. Wal-Mart presumably entered into its joint venture with Bharti in the hope that policy would free it up to structure its business as per the business logic. That hope has been dashed, leaving only mutual inconvenience. Exit is the logical option.