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India suspends plan to let in foreign retail

India suspends plan to let in foreign retail

December 7th, 2011 by RAVI NESSMAN and ERIKA KINETZ, Associated Press in News

NEW DELHI (AP) - India's government on Wednesday suspended its plans to throw open its huge retail sector to foreign companies such as Wal-Mart in a decision seen as a major capitulation to political opponents.

The initial decision last month to allow foreign companies to own 51 percent of supermarkets in major cities and 100 percent of single-brand stores was hailed by the business community as a long overdue reform. The government said foreign retailers would bring better prices for farmers and lower prices for consumers by cutting out middlemen and upgrading the country's infrastructure.

But opposition parties and even some members of the governing coalition protested against the deal, saying it would crush local mom-and-pop stores that are the heart of Indian retailing. Opposition lawmakers disrupted Parliament for days in protest.

On Wednesday, the government held a meeting with all the parties in Parliament to hammer out a deal: It would put the decision on hold if they would let the legislature function.

Afterward, Finance Minister Pranab Mukherjee told Parliament that foreign retail was "suspended until a consensus is developed through consultations with various stakeholders."

It was not clear how long that process would take or whether the policy would be implemented or canceled after it was over.

Opponents claimed victory.

"It is a virtual rollback," said Gurudas Dasgupta, a Communist Party lawmaker.

"This is a signal that this government can't do anything with force," said Ashok Gulati, chairman of the Commission for Agricultural Costs and Prices in the Ministry of Agriculture. "It's the nation that loses."

But Farooq Abdullah, a Cabinet minister, denied the government had surrendered. "There is no roll back."


Kinetz reported from Mumbai