Indian industry has responded angrily to a delay in government plans to open the retail sector to foreign supermarkets, warning that failure to push through reforms puts economic growth at risk. Prime Minister Manmohan Singh has come under fierce opposition since the changes were announced 10 days ago - and his administration could be seriously weakened if its key reform pledge is not enacted.
Under the plans, global firms such as Wal-Mart and Tesco will be able to hold a 51 percent stake in supermarket chains in a retail revolution widely seen as a threat to many of India's local neighbourhood stores. The Press Trust of India news agency on Monday quoted sources as saying Finance Minister Pranab Mukherjee had spoken to opposition parties and was "willing to keep the decision in suspension" until consultations were complete.
Business leaders are broadly in support of opening up the sector and reject as misconceived fears that it would hit jobs and traditional commerce. "Modernisation of retail trade is an essential part of India's growth story," said Deepak Parekh, chairman of HDFC bank, and Ashok Ganguly, the former head of Hindustan Unilever and a member of the upper house.
"It is well-known from experiences of countries such as China, Indonesia and several others that modern retail trade and traditional traders can, and do, prosper side-by-side," they said in a statement. They also attacked lawmakers for paralysing parliament through constant protests and adjournments over the issue that have led to legislative deadlock.
In the face of the backlash, business has been pushing hard on the benefits of greater overseas investment in Indian retail. The Confederation of Indian Industry (CII) said the policy would be a "major boost to the economy" and help increase confidence at a time of high inflation and interest rates.
An Associated Chambers of Commerce and Industry of India (ASSOCHAM) survey, published on Sunday, suggested that 90 percent of consumers believed the measure would increase choice and lower prices. More than 75 percent of farmers said direct dealings with retailers would cut out middle-men and help them get a fairer price, while improved supply chains would reduce waste.
But the poll of 2,000 people in 10 major cities also indicated that 80 percent of convenience store owners were opposed, claiming that "big box" stores were not as flexible in terms of home delivery and credit services. Uncertainty over the reform saw retail stocks plunge on Indian markets on Monday, with the Future Group's Pantaloon Retail down as much as 13.2 percent. Analysts warned that an indefinite suspension would further damage the government's reputation after months of difficulties and accusations of policy drift.
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