09/17/2012, 00.00
INDIA

India's decision to open retail sector to global chains could bring down government

A major ally of the ruling coalition, Trinamool Congress chief Mamata Benerjee, said her party would quit the government if New Delhi did not stop the plan to allow 51 per cent foreign direct investment by giants like Wal-Mart and Carrefour in the multi-brand retail sector. This is expected to hit hard small retailers.

Mumbai (AsiaNews/Agencies) - India's government is in trouble after Prime Minister Manmohan Singh approved a plan on Friday to open the country's retail sector to global supermarket chains. West Bengal Chief Minister Mamata Banerjee, head of the Trinamool Congress, a powerful member of the governing United Progressive Alliance (UPA), expressed her opposition to the plan in the strongest terms, saying it would hurt small Indian retailers. For this reason, she said she would have to make hard choices if the central government did not reverse itself by tomorrow.

Banerjee's cryptic remarks have left public opinion confused. For some, the Trinamool Congress will leave the UPA if the liberalisation of the retail sector goes ahead. This would weaken the Congress Party in favour of the main opposition party, the Hindu nationalist Bharatiya Janata Party (BJP).

However, one of Banerjee's close advisers, Kunal Gosh, said the rumours were baseless, reiterating the Trinamool Congress's support for the UPA administration.

According to the plan, global companies could hold 51 per cent in foreign direct investment in the multi-brand retail sector, giants like Carrefour and Wal-Mart, and 100 per cent in single-brand retailers like Nokia and Reebok. At present, such players can only sell wholesale, not directly to consumers.

Singh's plan is not new. In November of last year, the government tried to push through similar changes, but it fell through even before it could take off because of opposition within and without the UPA coalition.

If the prime minister pulls it off this time, it would represent a fundamental shift for India and this for various reasons. India has one of the faster growing retail markets, estimated at US$ 450 billion, in a system that employs about 40 million people with most retail business done by small merchants.

 

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