The Indian government has suspended talks to allow foreign investment from the world’s largest retailers with no clear timeframe in place to re-start discussions.
The move to allow further Foreign Direct Investment (FDI) was one of a number of proposed reforms by Prime Minister Manmohan Singh which have been dogged by protests and suspensions of parliament while being debated over the last two weeks.
Under the proposals, foreign retailers would be allowed to own up to 51% of supermarket chains after years of speculation over an amendment to FDI rules. The cap on single-brand stores including Apple and Ikea was to be raised from 51% to 100% but that decision is also on hold.
Singh is keen to attract foreign investment to improve supply chain infrastructure and benefit from potential increased revenue in the economy from India’s burgeoning middle class.
The president of the Federation of Indian Chambers of Commerce, Harsh Mariwala, said the decision was “deeply disappointing” and “highly regressive”.
Tristan Rogers, chief executive of ConcretePlatform which works with UK retailers in Asia, said: “India has a quandary, because the foreign investment potential of this relaxation is significant, but it does impact on the small local retailer, so it’s a case of whether they want to play on the global stage or be protectionist to their local trade model.”
Rogers expects the Indian government to ultimately accept FDI with retailers starting to enter larger states and gradually increasing their presence.