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Plan to open India's retail sector stymied
Source: Bloomberg News |
November 29, 2011, Tuesday
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Print Edition
INDIAN Prime Minister Manmohan Singh's bid to open India's retail sector to foreign companies like Wal-Mart Stores Inc suffered a blow as allies joined opposition parties to stall parliament for a fifth day over the plan.
In a rare concerted attack on the ruling Congress party, Singh's two largest parliamentary partners joined the opposition in criticizing the policy approved by the Cabinet last week, forcing both houses of parliament to adjourn minutes into proceedings. Overseas retailers stand to be barred from opening stores in at least 19 of India's 45 largest cities with regional assemblies set to veto their entry.
"There is a lot of very strong opposition to this initiative that will take a very long time to resolve," said Manish Sonthalia, who manages US$250 million in equities at Mumbai-based Motilal Oswal Asset Management Co. "It is disappointing that there is no consensus at all."
The biggest change to foreign ownership rules in India in more than six years came after Singh's government had been on the defensive for more than a year, its legislative agenda stalled by corruption scandals. Commerce Minister Anand Shamra last week argued the step to attract foreign retailers may create up to 10 million jobs, give better prices to farmers and help to reduce inflation by cutting food waste. Stores would be limited to cities of more than 1 million people, he said.
His attempt to douse opposition to the plan failed. Uttar Pradesh Chief Minister Mayawati, the leader of India's most populous state, was among the regional leaders criticizing the government's decision on Sunday. She said allowing foreign direct investment in the retail sector would bankrupt her state by forcing local shops to close down and was motivated by a desire to appease overseas companies.
Tamil Nadu's Chief Minister J. Jayalalithaa condemned the government for failing to consult parliament on such a key decision and said that the experience of allowing foreign retailers in other countries led to price rises as companies establish a monopoly exploiting farmers and consumers.
"The world over, whenever local governments opened up the retail sector, local prices went up sky high," Jayalalithaa said in a statement. "To announce such a major policy decision affecting millions of people outside of parliament without even consulting the state governments is unprecedented and indicates the overwhelming arrogance of the government."
In a rare concerted attack on the ruling Congress party, Singh's two largest parliamentary partners joined the opposition in criticizing the policy approved by the Cabinet last week, forcing both houses of parliament to adjourn minutes into proceedings. Overseas retailers stand to be barred from opening stores in at least 19 of India's 45 largest cities with regional assemblies set to veto their entry.
"There is a lot of very strong opposition to this initiative that will take a very long time to resolve," said Manish Sonthalia, who manages US$250 million in equities at Mumbai-based Motilal Oswal Asset Management Co. "It is disappointing that there is no consensus at all."
The biggest change to foreign ownership rules in India in more than six years came after Singh's government had been on the defensive for more than a year, its legislative agenda stalled by corruption scandals. Commerce Minister Anand Shamra last week argued the step to attract foreign retailers may create up to 10 million jobs, give better prices to farmers and help to reduce inflation by cutting food waste. Stores would be limited to cities of more than 1 million people, he said.
His attempt to douse opposition to the plan failed. Uttar Pradesh Chief Minister Mayawati, the leader of India's most populous state, was among the regional leaders criticizing the government's decision on Sunday. She said allowing foreign direct investment in the retail sector would bankrupt her state by forcing local shops to close down and was motivated by a desire to appease overseas companies.
Tamil Nadu's Chief Minister J. Jayalalithaa condemned the government for failing to consult parliament on such a key decision and said that the experience of allowing foreign retailers in other countries led to price rises as companies establish a monopoly exploiting farmers and consumers.
"The world over, whenever local governments opened up the retail sector, local prices went up sky high," Jayalalithaa said in a statement. "To announce such a major policy decision affecting millions of people outside of parliament without even consulting the state governments is unprecedented and indicates the overwhelming arrogance of the government."
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