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Govt suspends FDI in retail till consensus reached, Parliament logjam ends

The deadlock in Parliament over the government's decision to allow FDI in the retail ended after an all-party meeting passed a resolution to suspend the move till consensus is reached.

BT Online Bureau | December 7, 2011 | Updated 18:38 IST

The deadlock in Parliament over the government's decision to allow foreign direct investment (FDI) in the retail sector ended on Wednesday after an all-party meeting passed a resolution to suspend the move till consensus is reached.

Leaders of political parties emerging out of the meeting said Parliament will function and they have agreed on the government's decision to suspend foreign investment in retail for the time being.

When half of Parliament's winter session got washed out

Associated Press reports that the government's move to suspended its plans on opening up India's huge retail sector to foreign companies such as WalMart will be seen as a major capitulation to political opponents.

FDI in Retail: Business leaders call Opposition protests 'drama'

The initial decision taken in November to allow foreign companies to own 51 per cent of supermarkets in major cities and 100 per cent of single-brand stores was hailed by the business community as a long overdue reform.

The government said foreign retailers would bring better prices for farmers and lower prices for consumers by cutting out middlemen and upgrading the country's infrastructure.

But Opposition parties and even some members of the governing coalition protested against the deal, saying it would crush local mom-and-pop stores that are the heart of Indian retailing. Opposition lawmakers disrupted Parliament for days in protest.

On Wednesday, the government held all-party meeting ended Parliament logjam, allowing the legislature to function.

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"FDI is being suspended," Farooq Abdullah, a Cabinet minister said, without clarifying how long the suspension of the decision would last. "Parliament is going to function ... everyone has agreed."

Reuters reports the move of suspension will affect India's clout as a major economy in the world.

Coming less than two weeks after it announced the move, the retreat is another nail in the coffin of Prime Minister Manmohan Singh 's economic reform programme, just as Asia's third-largest economy suffers from a growth slowdown and falling investment.

Both ruling Congress party allies and opposition parties, fearing massive job losses for millions of small shopkeepers, had disrupted Parliament for two weeks in protest, stalling some key bills such as increased food subsidies for the poor.

The suspension will help cement a view that the world's biggest democracy is an emerging market slowcoach, slowly losing economic clout to other BRIC nations like China and Brazil.

US welcomes FDI in India's retail sector | Retailers back government

"The image, the credibility of the government is lost," said D.H. Pai Panandiker, head of the RPG Foundation think-tank.

"The business community is frustrated anyway. In fact, many of the companies are cash rich, but still don't want to invest. The decision-making process by the government has almost come to a stop. That's the problem."

"This decision has certainly delayed creating new economic activity," said Kishore Biyani, CEO and managing director of Future Group, the parent company of retailer Pantaloon.

"We are convinced that good sense will prevail at some point, and a consensus will emerge in some form, maybe not in the initially proposed form."

HIGHLIGHTS OF THE DAY:

  • CPI calls move "virtual rollback"; "We will allow Parliament to function"
  • Parliament convenes smoothly after govt suspends FDI in retail
  • Finance Minister Pranab Mukherjee briefs Lok Sabha on the decision
  • "Govt will take all stakeholders on board for FDI in retail"
  • "CMs to be consulted on FDI in retail too"
  • Commerce and Industry Minister Anand Sharma briefs Rajya Sabha on the decision to put FDI in retail on hold
  • Leader of Opposition Sushma Swaraj welcomes govt's move, says "grateful to PM Manmohan Singh for letting democracy win"

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