The Indian government has suspended its decision to allow 51 per cent foreign direct investment (FDI) in multi-brand retail until a consensus is reached through consultations with various stakeholders, finance minister Pranab Mukherjee announced today (December 7).
Ruling Congress party allies and opposition parties have disrupted parliament for two weeks in protest against the government's retail policy, which would have allowed foreign supermarket chains like Wal-Mart and Tesco to set up shop in India.
The government hoped these supermarkets' arrival would ease high inflation, improve supply-chain infrastructure and create jobs.Opponents to the reform feared job losses for millions of small local shopkeepers.
A senior industry source told news agencyReuters the suspension also applied to foreign investment in the single-brand retail sector, which was to be raised to 100 per cent from 51 per cent.
According to Reuters, the Indian government gave no timeframe for reviving the retail reform. And analysts claim deep political divisions over the issue could keep it on the back-burner for some time.
'The decision has certainly delayed creating new economic activity,' Kishore Biyani, CEO and managing director of Future Group, the parent company of local retailer Pantaloon, told Reuters.'We are convinced that good sense will prevail at some point and a consensus will emerge in some form, maybe not in the initially proposed form.'
One senior government source told Reuters it was 'premature' to say the retail plan would be watered down in future.
