By Jason Burke
The beleaguered Indian government has been forced to suspend its decision to allow international supermarkets to invest in India's £300bn retail market in the face of political opposition.
Finance minister Pranab Mukherjee, one of the most senior members of the ruling centre-left Congress party, was reported on Monday to have told leaders of both rightwing and communist opposition parties that the government would postpone the implementation of the move to allow global companies such as Walmart, Tesco and Carrefour into India until more people were convinced of its merits.
Allies of the increasingly vulnerable administration of Manmohan Singh, now in its second term, had refused to back the measure. Critics said the move, which theoretically does not need parliamentary approval, would put millions of shopkeepers across India out of business and threaten the livelihood of farmers.
Supporters argued that it would mean improvements of infrastructure and lower prices for consumers.
Analysts said the delay to the move was due to "political not ideological factors. There are local elections coming up and no one wants to risk the commercial traders' votes. Also there has not been proper consultation with allies," said Prabhakar Kumar, of CMS Media Lab. The failure to implement what would have been the first major economic reform since Singh's second term began in 2009 will reinforce the sense of drift surrounding the Indian government, compounding anxiety at a time when growth has slowed, inflation remains high and the value of the Indian rupee is dropping fast.
Stock prices of Indian retailers plunged in response to the news. The issue has also revealed splits within the Congress party itself, pitting Singh, who made his name dismantling the legacy of decades of central planning to allow India's recent growth, against Sonia Gandhi, president of the party and widow of former prime minister Rajiv Gandhi, who has failed to publicly express any support for the move.
Her son, Rahul, last week told a rally that allowing the major supermarket chains to take a 51% stake in local concerns was "not a key issue".
Opposition parties have blocked all business in the national assembly since the controversial move was announced after a cabinet meeting last week, increasing pressure on the administration.
Government officials have nonetheless insisted that the measure will finally be implemented. "This is a normal process of debate. Nothing is ever simple. This is just a pause, not the end and we will do the necessary to make things come out right in the end," a government official said.
Kumar, the analyst, said the measure was likely to be eventually passed. "It has been very badly handled but no one at the moment is being very realistic. Negotiations are on and they will probably get some kind of compromise in the end," he said.
• This article was amended on 6 December 2011. The original credited a quote to Bhaskara Rao, of the Delhi-based Centre for Media Studies rather than Prabhakar Kumar, of CMS Media Lab. This has been corrected.
