India 'suspends' retail reform: government ally

India's government has "suspended" plans to open the nation's huge retail sector to global competition that have paralysed parliament, a key ally of the ruling coalition said on Saturday. The move to allow foreign investment by Wal-Mart and other supermarket giants in India's estimated $470 billion retail industry was the first big reform to be announced since the government began its second term in 2009.
"(National finance minister) Pranab Mukherjee has informed me that the government is suspending the FDI issue until a consensus is evolved," Mamata Banerjee, chief minister of West Bengal state, said in televised remarks. Mukherjee said he could not confirm Banerjee's statement.
"Officially I cannot announce anything because Parliament is in session. A government announcement will be made in parliament," he told reporters. A Congress party spokesman said that the party welcomes all meaningful efforts to break the stalemate. "In such a situation (as changes to the retail policy), a broad consensus is required," Congress general secretary Janardan Dwivedi told India's CNN-IBN network late Saturday.
Indian television quoted government sources as saying Premier Manmohan Singh's government was not abandoning the retail policy changes announced late last month but would seek broad agreement before proceeding. Anger over the reforms has united shopkeepers, trade unions, influential state leaders and lawmakers from opposition parties and from within Singh's own coalition.
Banerjee's regional Trinamool Party is the biggest partner of the Congress coalition and important to its survival in parliament. The Trinamool Party had objected to the government allowing international supermarkets into India, saying the move would swamp small family-owned stores, which dominate the retail landscape and throw millions out of work.
The retail sector is India's second-largest employer after agriculture. Any retreat on retail reform would be a major blow to Singh's administration, which has struggled for months with charges of policy paralysis amid worsening economic data, high inflation and corruption scandals. "A rollback would be a very bad thing," Saloni Nangia, senior vice-president of retail at Technopak, a top Indian consultancy, told AFP before the Trinamool statement.
"It would send a bad signal to the international community about the potential for investment," she said. Foreign multinationals have lobbied for years to sell directly to Indians. The furore has hamstrung parliament, threatening to derail the government's legislative plans for the session.
The main opposition Bharatiya Janata Party (BJP) - a staunch free enterprise advocate when in power - has been co-ordinating protests against with shopkeepers who staged a one-day nation-wide strike last Thursday. "Wal-Mart may be fine (for the West) but Wal-Mart does not serve us," veteran BJP leader L.K. Advani told the Hindustan Times Leadership Summit.
The BJP said it wanted a formal abandonment by the government of the decision to open up to retail to global supermarkets before it would let parliament function. The government must not "fool the people that foreign direct investment (FDI) in the retail sector is a panacea to solve all problems of poverty and unemployment," Advani said.