Shares in retail firms fell and the country's business community rounded on the government on Monday after the ruling Congress party appeared to have put on hold plans to open up the India's $450 billion retail industry to foreign supermarkets via the foreign direct investment (FDI) route.
The beleaguered government paused its much-trumpeted plans to open up the sector, a senior government source said on Sunday, as Prime Minister Manmohan Singh fought to retain the support of his party's allies amid a cacophony of dissent.
Local retailers who stand to benefit from rules allowing global giants such as Wal-Mart to take a 51 percent stake in supermarket operations opened down as much as 10 percent on Monday.
Any postponement or watering down of the policy, which some say will destroy the livelihood of millions of small shop owners, would be a huge embarrassment for the government, which has failed to pass any big-ticket economic reforms as it struggles with allegations of widespread graft.
Mamata Banerjee, the firebrand leader of the Congress party's biggest ally and a opponent of the policy, said on Saturday the government had told her the plans would be put on hold until a consensus had been reached.
Singh has scored an own-goal by not even seeking out the support of his own party, never mind allies within the UPA (the government coalition), before his cabinet took the decision, it was reported on Monday.
That the (coalition) has been sailing in choppy waters without much of a compass to guide its journey becomes apparent.
The government was likely to release an official statement regarding the issue on Monday.
The main opposition, the Bharatiya Janata Party (BJP), has led protests in Parliament against the measure, which was passed by the country's cabinet two weeks ago. Both chambers have been paralysed by vociferous dissent.
Opposition to the measure was to the detriment of the vast majority, wrote Ashok Ganguly, former chairman of Hindustan Unilever and Deepak Parekh, chairman of Housing Development Finance Corp, in an open letter described as a call to the saner sections of Corporate India to come out and strongly support progressive measures.
Shares in Pantaloon,