The Indian Government has suspended foreign supermarket entry after political backlash. Plans have been suspended to open its $450 billion supermarket sector to foreign firms such as Wal-Mart Stores Inc. The government has backtracked from one of its boldest reforms in years anticipating a huge political backlash.
This retreat has come about in a span of a fortnight of the policy being announced and it is another nail in the coffin of the Prime Minister’s economic reform program. India is suffering from slowing growth and dwindling investment. This is going to confirm many doubts that India is becoming a slowcoach compared to countries like China and Brazil for investments. The image and the credibility of the government will go for a six with this decision.
Both the Congress Party and the opposition parties have got scared that there will be millions of job losses for small shopkeepers as they disrupted the progress of this decision for almost a fortnight. In the bargain, some key bills such as increased food subsidies for the poor have also been stalled.
The decision to permit fifty one per cent in multi brand retail trade is now suspended until a consensus is gained through consultations among stake holders. The only bright side to this is that the government may now have to pass other key reforms when they put the retail plan on hold. This retail policy would have allowed Wal-Mart, Carrefour and Tesco to own about fifty one per cent in supermarkets. The government was hoping that this would ease high inflation and draw in investment to help the supply and chain infrastructure and create fresh jobs.
The suspension also applies to foreign investment in the single brand retail sector. Shares of Indian retailers were mostly flat today after falling sharply earlier this week.