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India Hits Pause on Divisive Foreign Supermarkets Plan
December 04, 2011

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Mumbai. India has put a plan to open up its retail industry to foreign supermarkets on hold, a senior government source said on Sunday, an embarrassing turnaround for a beleaguered government fighting to retain the support of key allies.

The move 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 who say it will destroy the livelihood of millions of small traders.

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

The idea appears to be to give the under-fire ruling party time to gain the support of its key coalition allies.

“Parliament needs to get going again. There is so much that the government needs to do,” the source added, a day after the government’s biggest ally said the policy was being sidelined due to disagreement within the ruling coalition.

Any postponement or watering down of the policy would be a huge embarrassment for Singh’s government, which has failed to pass any big-ticket economic reforms as it struggles with allegations of widespread graft.

Singh has lost much of his credibility as the reformer who turned India from near-bankruptcy 20 years ago to an economic wonder.

The government is due to release an official statement regarding the issue today.

Allowing foreign direct investment in a retail industry dominated by small shops was trumpeted by Congress as a policy that would help ease stubbornly high inflation, improve supply-chain infrastructure and create millions of jobs.

The main opposition Bharatiya Janata Party has led protests against the reform in Parliament that have paralyzed both chambers every day since the 21-day winter session opened last week.

Possible dilution of the policy could include lowering the 51 percent foreign investment permitted under the current rules, increasing the percentage of products to be sourced locally or the amount firms must spend on developing infrastructure.

Reuters