India’s ruling Congress Party on Tuesday failed to persuade both its allies and the opposition to support the country’s new open-door policy for foreign retailers.
The Cabinet decision last week to let foreign retailers own up to 51 percent of supermarkets and 100 percent of single-brand stores has unleashed a political furor across the country, with parties across the spectrum demanding its immediate revocation.
A meeting of lawmakers from all parties in parliament to discuss the dispute collapsed on Tuesday morning, and the national legislature was forced to adjourn for a second day in a row because of the deadlock.
Communist Party of India (Marxist) MP Sitaram Yechury called the policy “disastrous” and accused the government of blind-siding its opponents by pushing the new rules without consulting parliament.
“The demand of the whole opposition is that the decision should be revoked,” Murli Manohar Joshi, a leader of the opposition Bharatiya Janata Party, told the Press Trust of India.
The new regulations don’t require parliamentary approval, but to set up shop, foreign retailers such as Wal-Mart and Tesco must get approval from the government of the state where stores will be located.
Five state leaders have already made it clear they are unwilling to let in foreign companies. Two of the ruling party’s main coalition allies also oppose the policy, though they said they would not quit the government over the dispute.
As the argument raged, Ikea chief executive Mikael Ohlsson visited India to evaluate the new rules. He could make an announcement regarding Ikea’s investment plans as early as yesterday, Ikea spokeswoman Josefin Thorell said.
Ikea has long wanted to come to India, but declined to do so under the old investment rules, which required it to work with an Indian partner.
The US, which had urged India to open up to foreign retailers, welcomed the decision to do so. US Department of State spokesman Mark Toner said on Tuesday it would strengthen business and economic ties between the US and India and create more choice for Indian consumers.
Addressing a meeting of the Congress Party’s youth wing, Indian Prime Minister Manmohan Singh said the regulations would improve transportation and storage of food supplies and lead to the creation of new jobs.
“I urge you to spread awareness about this across the country,” he said.
Communist Party-controlled trade unions have threatened to strike today and at least one lawmaker from the rightwing Bharatiya Janata Party has even threatened to burn down foreign big-box retailers.
The opponents of the policy, which would allow big foreign retailers to set up supermarkets only in major cities, say it threaten millions of India’s small traders.
Indian Commerce Minister Anand Sharma has said that the change will be a boon for both consumers and farmers rather than a threat to small store owners. He said the new rules would edge out unscrupulous middlemen who eat into the profits of the small farmers.
Sharma said it would also bring down the cost of food for everyone, eliminate spoilage that claims up to 40 percent of all fresh produce and create millions of jobs.