India seizes foreign supermarket plan
Indian government will put a plan to open up its retail industry to foreign supermarkets on hold until it reaches consensus within the coalition, risking a possible dilution of the policy rather than a change of heart.
The decision to allow global giants such as Wal-Mart into India's $450 billion retail market, the first major economic reform since Prime Minister Manmohan Singh's graft-riddled term began in 2009, has been met with fierce opposition from some parties who say it will destroy the livelihood of millions of small traders.
Mamata Banerjee, who is against the policy and whose Trinamool Congress brings 19 votes to the ruling Congress party-led coalition, said that Finance Minister Pranab Mukherjee had told her that the policy would be put on hold.
"(Mukherjee) has told me that the centre has decided to suspend implementation of the decision to allow FDI in retail," Banerjee, chief minister of West Bengal, told reporters in Kolkata in a press conference broadcast on local television.
Possible dilution of the policy could include lowering the 51 percent foreign investment permitted under the current rules, or increasing the percentage of products to be sourced locally, or the amount firms must spend on developing infrastructure.
Any retreat on the policy would be seen damaging India's image with foreign investors as Asia's third-largest economy shows signs of slowing, and would add to a basket of key economic reforms that have been shelved by Singh's government.
A senior leader of the main opposition Bharatiya Janata Party (BJP) said the government was fooling the country about the benefits of foreign supermarkets,
"Wal-Mart may be fine for (the West) but Wal-Mart does not serve us," L.K. Advani, a former president of the BJP and leader of the opposition from 2004 to 2009, told a summit in New Delhi. "We should not be envious of Wal-Mart," Advani said.
Allowing foreign direct investment (FDI) into the retail industry is one of a basket of reforms, seen as key to sustaining India's continued growth, that have been postponed over the past 18 months as the government reeled from scandal to scandal.
The controversy has drawn on some deep-seated nationalism in the right-wing BJP, which appeared to support the policy in 2004 but has now jumped to the support of millions of small shopkeepers that they see as a key vote base.
Singh this week rejected calls to roll back the policy amid media reports that some of his coalition partners were thinking of adding their voice to the opposition.
"Local retailers have been content thinking small and doing little. It's time to change that mindset by opening up to FDI in retail," the Economic Times said in an editorial on Saturday.
The reform, as it stands, would allow global chains like Wal-Mart, Tesco Plc and Carrefour to own up to 51 percent of retail ventures and allow foreign firms to fully own single-brand retail operations.
MUMBAI: TP MD, Dec 04, 2011
