‘Political giants’ pressurise Indian govt to halt retail giants’ market entry

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A porter holds up his basket and makes his way through a crowded market in Mumbai, India. Photo - AP

Sources inside Indian government insist plans to open up the retail industry have been put on hold, days after giving a formal nod to global retail giants. Opposition parties and senior figures within the government openly criticised the move which will allow retail big-wigs such as Wal-Mart, Tesco and Carrefour into India’s $450 billion retail market.

“This is a pause,” a source within Indian government told Reuters. “Do not see it as a rollback, as if the government is giving up on it. This is just a small pause.”

Political analysts believe Manmohan Singh’s administration is trying to shore up public support and muster political allies for upcoming state elections. Rampant inflation, rising food and oil prices and corruption scandals have badly dented government’s public ratings.

“Parliament needs to get going again. There is so much that the government needs to do,” the source insisted on condition of anonymity. The revelations came a day after the government’s biggest ally said decision to open up retail industry to foreigners was being suspended due to disagreement within the ruling coalition.

Manmohan Singh’s administration faces huge embarrassment if it waters down or scraps its decision to allow foreign direct investment and overtures made to global retail giants. Much of the government’s credibility has been dented thanks to failures to legislate massive economic reforms and clamp down on widespread graft and kickbacks culture.

Foreign investors are urging the Indian premier, regarded as the founder of economic reforms that set the path of India’s economic prowess 20 years ago, to open up Asia’s third-largest economy and help the ‘benefits of globalisation’ reach country’s billion-plus population.

Congress-led government insists allowing foreign direct investment into retail industry will tackle high inflation, improve supply-chain infrastructure, promote healthy competition and create millions of jobs. Critics of the so-called reforms insist retail giants contributed to inflation, price fixing, monopoly and high unemployment in many developed countries and India should not go through this in the name of liberalisation.

Both chambers of the Indian parliament stay paralysed since the last 21 days by opposition parties that are protesting against the reform.


Mamta Banerjee, firebrand female politician and key ally of Congress-led coalition, said she has sought assurances from the government that retail industry reform plans have been put on hold until a consensus is not reached.

Coalition governments in India are prone to political blackmailing as they seek support from small regional parties that bring vital votes but hold the reins of the governing chariot.

Many critics are unhappy that opposition parties are pursuing opportunist policies instead of cooperating with the government to seek out solutions.

“This is just Indian politics. Parliament is being stalled by an issue that only a few months ago everyone was in agreement with,” the anonymous government source told Reuters.


Indian government could seek to curtail the 51 per cent foreign investment allowed under recently announced rules while increasing the percentage of products to be sourced locally or the amount global firms must spend on developing infrastructure.

Trade Minister Anand Sharma told news channels his government carefully drafted a strategy and there will be more deliberations before a decision is reached.

“We have acted out of conviction and carefully thought it through,” the minister told CNN-IBN TV channel Sunday in an interview.

“We will talk with our allies,” he added while ruling out any u-turn.

Indian government recently opened its $450 billion retail market to global giants allowing them foreign direct investment of up to 51 per cent in multi-brand retail segment. Manmohan Singh administration also removed FDI cap on international brands, enabling them to retain 100 per cent ownership rights.

Opposition parties and several consumer rights groups have condemned the decision and increased their pressure on the government to scrap the concessions recently given to multi-national retain chains that threaten livelihood of millions of traditional shopkeepers and small traders.

(By Moign Khawaja with input from Reuters)

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