Business

India all-party talks fails to end retail deadlock

Protesters hold anti-FDI banners in India
Image caption The government's decision to allow FDI in the retail sector is bitterly opposed by the opposition

An all-party meeting in India has failed to break a deadlock over opposition demands to reverse a decision to open up the retail market to global supermarket chains.

On Thursday, the cabinet agreed to allow 51% foreign ownership of multi-brand retail stores. It is an executive decision and does not need a vote.

But opposition politicians say the move will damage India's small retailers.

And parliament has been in uproar, adjourned repeatedly over the issue.

A leader of one of the opposition parties, Satish Mishra, told reporters after Tuesday's meeting that the government had asked for more time "to think on the issue".

Opposition politicians said at the meeting that they would not allow parliament to function until the government rescinded the decision.

Foreign investment 'solutions'

But the Congress-led coalition government says that retail reform will create tens of millions of jobs.

By allowing for 51% foreign direct ownership (FDI) of multi-brand retail stores, groups like Tesco and Wal-Mart can open stores. Such operators can currently only sell wholesale in India and not directly to customers.

Earlier Commerce Minister Anand Sharma wrote a letter to the political leaders saying the absence of proper supply chain, cold storage infrastructure and logistics were hurting Indian farmers and that foreign investment in retail will help solve those issues.

"As a result, on the one hand farmers are unable to secure remunerative price for their produce, while consumers end up paying more than five times the price secured by the farmers," Mr Sharma said, adding that complexities in the distribution chain had an impact on prices as well.

The government has also agreed to raise the cap on foreign investment in single-brand retailing to 100%, from its current 51% limit.

Despite assurances from the government , there have been widespread protests against it.

The chief ministers of four major states have openly voiced their opposition, saying any such move will hurt businesses.

"I oppose it tooth and nail... it is not the right step as it will ruin the retailers and will lead to a point of unemployment beyond imagination in the country," said Nitish Kumar, the chief minister of Bihar.

At the same time, traders in various cities have also staged protests against the decision.

The growing discontent has forced some prospective investors to adopt a wait-and-watch policy.

"We are waiting for clarification of the rules related to FDI," said Jean-Noel Bironneau, managing director of Carrefour India. "We prefer to assess the situation."

More on this story