India Remains Deadlocked on Retail Reform

Posted November 29th, 2011 at 2:40 pm (UTC-5)
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The Indian government failed Tuesday to win support for a reform allowing foreign retailers into the country.

A meeting of lawmakers from all parties broke up without a deal being reached, forcing India's parliament to adjourn amid protests against the reform.

The Indian Cabinet last week had approved a measure allowing global firms to own up to 51 percent of multi-brand retail companies in India such as supermarkets. Foreign companies could also own up to 100 percent of single-brand retailers.

The country's main opposition Bharatiya Janata Party, says the reform will wipe out smaller retailers, leading to higher unemployment. The BJP has joined members of the Congress Party-led coalition and the chief ministers of some of India's most populous states in opposing the policy.

Indian Prime Minister Manmohan Singh said Tuesday that the reform will improve rural infrastructure and food distribution, bringing down food costs and creating jobs.

The prime minister told a rally in New Delhi that the decision was taken with careful consideration.

The new foreign-owned stores would be allowed in cities with a population of at least one million. The retailers must invest at least $100 million and half of this would have to be invested in rural infrastructure and refrigerated transport and storage. Thirty percent of their produce would also have to come from small and medium enterprises.

Global retail giants, including U.S.-based Wal-Mart and France's Carrefour, have waited for years for India to open its $450 billion domestic retail market, which is dominated by family-run stores.

India's retail sector is the country's second biggest employer after agriculture.