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Indian Industry Voices Concern about Stalled Retail Reforms

In this Nov. 26, 2011 photo, Indians shop at a crowded market in Mumbai, India. The arrival of modern retailing would hasten a cultural transformation in the way Indians shop and work.

In India, industry leaders have expressed concern at reports that the government is not moving forward with plans to allow foreign investors to open super stores in the country. There is no official announcement on the status of the reform measure. But a political ally of the government says officials are now trying to get more political support for the landmark reform.

The government's decision apparent decision to delay opening India's retail sector to foreign chains, such as Wal-mart, follows fierce protests by its coalition allies and opposition parties.

A top leader of the Communist Party of India (Marxist), Sitaram Yechury said Monday that Finance Minister Pranab Mukherjee has informed him that the government will suspend the policy. A political ally of the government, Trinamool Congress, had earlier said that the policy has been put on hold until a consensus is reached on the issue.

The government has neither confirmed nor denied the reported suspension. But industry leaders say, if the government does not pass the legislation viewed as the biggest reform in years, it will reinforce the perception that the current administration is ineffective.

Rajiv Kumar heads the Federation of Indian Chambers of Commerce and Industry.

“It will send a very negative signal about policy making in the country and will takeaway all that positive sentiment that policy paralysis was behind us and so on. It will appear that, given the current political configuration and the climate, politics will always and continuously trump economics and that does not make for a good investment and business environment.”

Industry leaders support the government's view that modernizing India's retail sector will benefit farmers, consumers and create millions of jobs.

But those opposing the measure say foreign retail chains will threaten the survival of millions of small shopkeepers in the country. A combative opposition has stalled parliament since the measure to open the retail sector to foreign investors was announced.

Finance Minister Pranab Mukherjee met the leader of the two biggest opposition parties on Monday, in a bid to end the logjam. The opposition wants the government to clarify its position at a meeting of all political parties.

Political observers say any turnaround or watering down of the policy would be a huge embarrassment for the government. They say the Congress-led coalition government is being forced to backtrack to retain the support of key allies, who, along with opposition parties, have been demanding a rollback of the reform measure.