HONG-KONG entrepreneur Ramesh Tainwala spent 18 months operating clothing stores in India before deciding it was impossible to succeed without paying bribes.

Tainwala, a 55-year-old expatriate Indian, owns Planet Retail, which held the India franchises for US fashion labels Guess and Nautica as well as UK retailers Next and Debenhams. He sold the brands last September.

"Right now it's not possible to do business in India without greasing palms, without paying bribes," said Tainwala, who is also luggage maker Samsonite's president for Asia Pacific and West Asia.

India is the next great frontier for global retailers, a US$500 billion market growing at 20 percent a year. For now, small shops dominate the sector. Giants from Wal-Mart Stores to Ikea have struggled merely for the right to enter.

But a daunting array of permits - more than 40 are required for a typical supermarket - force retailers to pay so-called "speed money" through middlemen or local partners to set up shop.

The official cost for key licenses is typically accompanied by significant expenses in the form of bribes. The added cost erodes profitability in an industry where margins tend to be razor-thin. It also creates risk for companies by making them complicit in activity that, while common in India and other emerging markets, is nonetheless illegal.

That creates a handicap for foreign operators such as US-based Wal-Mart and Britain's Tesco and Marks and Spencer, which must comply with anti-bribery laws in their home countries even while operating abroad.

A Wal-Mart spokesman said the company was strengthening its compliance programs. Ikea, which is awaiting final approval to enter India, has started assessing the market, a spokeswoman said, adding that the group has "zero tolerance" for corruption in any form.

Retail is especially prone to bribery because stores sell multiple types of merchandise, which in India increases the number of licenses and permits needed - a legacy of the so-called "License Raj" that was largely dismantled during the country's early 1990s economic reforms.

"Even for a simple thing like putting up signage in front of your store you are harassed for money," said Tainwala. "There are many bodies regulating that and the permits needed to set up one shop are baffling."

The License Raj, he said, substantially increases costs in a market where sluggish consumer demand, high rentals and a depreciating currency have made it hard for retailers like him to operate profitably. He plans to return when there is more order in the way business is done.

Ais Kumar, head of the western region for the Food Safety & Standards Authority of India, acknowledged that graft exists across government ranks and departments. Many government departments also have staff shortages that cause delays.

"These licenses are required for compliance and safety and not because the government wants to delay or complicate things for anyone. It's the law of the land and it must be followed," he said.

Permits needed to open a store range from the mundane, such as a trade license, to the petty - lighted shelves require a separate permit, and even a shop window needs a license.

A convenience store that sells basics such as milk, vegetables, cereal, bread, eggs, meat and baby food will require a minimum of 29 licenses from nearly 20 different authorities, according to a list of licenses compiled by the Retailers Association of India.

All those licenses need to be renewed, sometimes annually.

"In India, you don't need to ask retailers if you need to pay bribes," said Punit Agarwal, CEO of Promart, a mid-sized multi-brand clothing retailer. "It's known. Here you have a price tag for everything."

He said his company hires middlemen and pays their fees because he knows bribes have to be paid, but does not want his company directly involved.

Tainwala says he was asked to pay a 22,000 rupee (US$400) monthly fee to have signage outside his store in Mumbai's plush Atria mall, or a 2,000 rupee bribe every month to circumvent it. He said he chose to pack up rather than bribe the officials needed to get his signs approved.