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India’s Opposition Demands Rollback of Move to Allow Foreign Retailers

A vendor exchanges money with a customer at a shop selling garlic, onions and potatoes at a wholesale market in Mumbai, April 28, 2011.
A vendor exchanges money with a customer at a shop selling garlic, onions and potatoes at a wholesale market in Mumbai, April 28, 2011.

In India, opposition parties and political allies of the government are demanding a rollback of a recent decision to further open up the country's retail business to foreign super stores.

The measure is seen as a mark of the government’s determination to put economic reforms back on track.

Two brothers, Rajesh and Rakesh Talwar, own a small shop where they sell eggs and bread in New Delhi’s Lodhi Road market.

They worry that large foreign retailers could drive them out of business, if they open super stores in India.

Rakesh Talwar fears the super stores will sell provisions like eggs at a lower price, compared to shops like his, because they can source directly from farms instead of buying from middlemen. He says customers will flock to those stores.

Opposition parties and political allies of the coalition government are backing that argument as they fiercely protest the government’s recent decision to allow 51 percent foreign direct investment in the multi-brand retail sector.

They say the arrival of foreign retail chains like Wal-mart and Tesco will threaten the livelihood of millions of small shop owners.

(photo credit: Reuters)

The controversy about super stores has become a political storm in parliament.

On Tuesday, opposition lawmakers stalled the legislature for a second day, with the issue.

Sushma Swaraj, the leader of the opposition Bharatiya Janata Party, insists that the government reverse the decision to open the retail sector to foreign investors. Swaraj is angry that the government did not take all political parties on board before announcing the landmark reform.

At least two political allies of the government are also demanding its rollback.

Several states ruled by opposition parties have already announced that they will block the entry of foreign super stores. They include Tamil Nadu, Bihar, Kerala, Uttar Pradesh and West Bengal, a state ruled by an ally of the ruling Congress Party.

Backers of the plan say the government went forward, despite the opposition, because it wanted to address concerns that the pace of economic reforms has flagged and it wanted to rejuvenate an economy which is slowing after years of high growth.

The government insists that foreign stores will bring in much-needed investment to build supply chains and cold storage facilities, improve farmers’ incomes, create millions of jobs and make food cheaper.

The so-called organized retail sector is at a nascent early stage in India, with a handful of domestic companies accounting for a mere six percent of India’s $450 billion retail sector.

The head of the Retailers Association of India, Kumar Rajagopalan, says foreign retail investors will transform India into a modern consumer society. He says the fears that the large stores will edge the millions of small stores out of business are unfounded.

“The average size of a retailer in this country has been 180 square fee," he says. "They have got hardly any costs of operations. They are themselves sitting at the store. And, they know who their customers are, they are very visible to the customer and those cannot be easily substituted at least for the next 10 years time. Because the need for having the nearby store with capability to deliver at home, give you credit, recognize you is still going to be there," says Rajagopalan.

But political opposition to the measure is unlikely to die down soon. On Thursday, several trade unions, backed by political parties, have announced a nationwide shutdown.

Officials say the government is braced to face the storm and has no plans to back down from the measure.