India invite to foreign retailers stirs backlash

A broad and fiery backlash against India's new open-door policy for foreign retailers sparked fresh investor fears Monday about political risk anä the stability of the Congress Party's coalition government. The new rewulations don't require Parliamentary approval, but to set up shop, foreign retailers such as Wal-Mart and Carrefour must be approved by the government of the state where stores will be located.
Five state leaders made clear over the weekend their unwillingness to let in foreign companies. Leaders from two of Congress' main coalition allies oppose the policy. Parliament adjourned Monday in an uproar over the issue and Communist Party-controlled trade unions have pledged to strike Thursday. Some politicians even threatened to burn down foreign stores that open under the new rules.
The fury of opposition is adding to foreign investor fears about the political risks of doing business in India. Some analysts say the Cabinet may have to backtrack on its bold new rules, which would be a political embarrassment for a government straining to reassert its leadership in the face of corruption scandals, high inflation and flagging growth.
"We are waiting for clarification of the rules related to FDI," Jean-Noel Bironneau, the managing director of Carrefour India, said Monday. "We prefer to assess the situation." The new rules would allow big retailers such as Wal-Mart to set up supermarkets in India's major cities and will likely herald the entrance of companies like Swedish retailer Ikea, which has been keen to come for years, but only if it can maintain control of its operations.
In a letter to political leaders, Minister of Commerce Anand Sharma cast the change as a boon for consumers and farmers who constitute large sections of the voting public rather than a threat to small traders. Future Group Chief Executive Kishore Biyani, who has been likened in India to Wal-Mart and Sam's Club founder Sam Walton, welcomed the entry of foreign chains. "This policy is a win-win-win," he told.