Bloomberg News

India Traders Strike as Singh Rejects Calls to Scrap Retail Plan

December 01, 2011

Dec. 1 (Bloomberg) -- Shops and markets across India were shut today as traders supported a daylong strike demanding the government scrap its decision to allow foreign retailers like Wal-Mart Stores Inc. to open outlets.

The nationwide protest by members of thousands of trade unions adds to pressure on Prime Minister Manmohan Singh who is fending off calls from opposition parties and coalition allies to roll back the policy. Opening the country’s $396 billion retail market to overseas companies, the biggest change to foreign ownership rules in six years, has triggered a political storm just as Singh was attempting to kick start a legislative agenda stalled by corruption charges.

“The strike demonstrates the anger and resentment of the trading community to foreign investment,” said Praveen Khandelwal, secretary general of the Confederation of All India Traders, by phone in the capital today.

Shopkeepers in states including Delhi, Gujarat, Karnataka joined the stoppage, he said. While it was not immediately possible to verify the extent of the strike, about 90 percent of stores in New Delhi’s normally bustling Karol Bagh market were shut late morning.

Owners of family run stores, the backbone of an Indian retail market that London-based Business Monitor International expects to double in size by 2015, fear they will be forced out of business by foreign companies. Parties including Singh’s main rival, the Bharatiya Janata Party, cite job losses as a central reason for their opposition.

“Foreign companies have so much more resources and money,” said Amarjit Singh, sitting outside his shut electronics and car-equipment shop in Karol Bagh which employs seven people. “I don’t think we will close down but it will be very hard,” Singh said, adding he didn’t expect the government to change its mind.

Slowing Growth

Commerce Minister Anand Sharma said last week the FDI proposals will create up to 10 million jobs and reduce the amount of farm produce that rots before it can be sold.

Overseas investment will help lower the highest inflation among Asia’s largest economies and have a “multiplier effect” on an economy that grew 6.9 percent in the last quarter, its slowest pace in more than two years, Sharma said.

Singh’s government, which has been assailed by charges of graft and policy drift for more than a year, had been discussing the opening of the retail sector for years.

Its decision to do so has sparked eight days of protests in parliament, forcing repeated adjournments. Members of Singh’s two biggest allies, Trinamool Congress and the Dravida Munnetra Kazhagam, have opposed the policy. Senior ministers and members of the ruling Congress party were meeting with alliance partners again today.

Vote Demand

The BJP and Communist Party of India (Marxist), which are supporting today’s strike, are demanding a withdrawal of the retail decision and a debate in parliament under a rule which entails voting.

Singh on Nov. 29 appealed for opposition parties to end the gridlock in parliament.

Parliament has seen repeated disruption for four sessions. Last year’s winter sitting was the least productive in 25 years. The government plans to pass 33 bills, including legislation to create an anti-corruption agency with powers to prosecute most government officials, have been sidelined by the protests over foreign direct investment in retail.

India’s cabinet last week took the decision, which doesn’t need parliamentary approval, to allow overseas companies to own as much as 51 percent of retailers selling more than one brand.

The government also approved plans allowing companies that sell a single brand such as Nike Inc. to own 100 percent of their operations, removing a cap previously set at 51 percent. Any investment by a foreign retailer would need the approval of state governments, many of which are run by opposition parties.

--Editors: Mark Williams, Sam Nagarajan

To contact the reporters on this story: Bibhudatta Pradhan in New Delhi at bpradhan@bloomberg.net; Andrew Macaskill in New Delhi at amacaskill@bloomberg.net

To contact the editors responsible for this story: Hari Govind at hgovind@bloomberg.net; Peter Hirschberg at phirschberg@bloomberg.net


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