INDIA has suspended plans to open its $450bn (£286bn) supermarket sector to foreign firms such as Wal-Mart, backtracking from one of the government’s boldest reforms in years in the face of a huge political backlash.
The retreat, within two weeks of the policy being mooted, is another nail in the coffin of Prime Minister Manmohan Singh’s (pictured) economic reforms, just as Asia’s third-largest economy suffers from slow growth and falling investment.
It is also likely to cement a view that India is an emerging market slowcoach compared to other so-called BRICS nations such as China and Brazil.
“The image, the credibility of the government is lost,” said DH Pai Panandiker, head of the RPG Foundation think-tank.
Both ruling Congress party allies and opposition parties, fearing job losses for millions of small shopkeepers, had disrupted parliament for two weeks in protest, stalling some key bills such as increased food subsidies for the poor.
“The decision to permit 51 per cent FDI in multi-brand retail trade is suspended until a consensus is developed through consultations among various stakeholders,” finance minister Pranab Mukherjee said in a statement yesterday.
The policy would have allowed foreign firms such as Wal-Mart, Carrefour and Tesco to own 51 per cent in supermarkets, with the government hoping this would ease high inflation, and draw in investment to improve supply-chains and create jobs.
City A.M. Reporter