India gave the green light on Friday for foreign supermarket chains to enter the country as part of a blitz of economic reforms intended to spur growth and revitalize the government.
Global leaders such as Walmart, Tesco and Carrefour are to be able to own up to 51 percent in Indian subsidiaries, allowing them into a previously protected but potentially hugely lucrative sector.
Last December, the administration of India Prime Minister Manmohan Singh, reeling from a string of corruption scandals, was forced to withdraw the reform proposal due to fierce resistance.
“The cabinet has taken many decisions today to bolster economic growth and make India a more attractive destination for foreign investment,” Singh said in a statement.”I believe that these steps will help strengthen our growth process and generate employment in these difficult times.”
The government also relaxed investment rules in the aviation sector to allow in foreign airlines for the first time, and approved the sale of stakes in four state-owned companies in the oil, copper and aluminum sectors.
The announcements follow a bold 12 percent hike in the price of heavily subsidized diesel on Thursday night, which analysts saw as the government looking to shake off its reputation for inaction and revive its reform agenda.
Indian Commerce Minister Anand Sharma told a press conference that the clear message was that “this government thinks of India’s interests, its growth, its development, job creation, wealth generation and infrastructure building.”
Shopkeepers, opposition parties and even an ally in the national coalition have opposed the change in the law on the grounds that it would destroy the livelihoods of the small business owners who dominate the retail sector.
Populist coalition partner Trinamool Congress, a regional party from the state of West Bengal, issued a 72-hour deadline for the government to roll back the reforms, setting up a tense political drama for next week.
The next task for Singh, 79, the architect of India’s first wave of market-oriented reforms in the 1990s, would be to keep the fragile coalition together.
The reforms have come at a time when investor sentiment is down the drain,” said Jyoti Narasimhan, an economist at the IHS Global Insight consultancy.
A recent poll by the Pew Research Center showed that just 38 percent of Indians thought the country was heading in the right direction.
The government sees foreign supermarkets as a way to improve the food supply chain, particularly in refrigerated facilities, as well as a means to create an estimated 10 million jobs and bring down food prices.