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December 5, 2011

UPDATE: INDIA: Business remains hopeful over FDI in retail

India's main business organisation is hopeful the country's government will press ahead with plans to open the retail sector further despite the plans being put on hold amid political opposition.

India’s main business organisation is hopeful the country’s government will press ahead with plans to open the retail sector further despite the plans being put on hold amid political opposition.

The Federation of Indian Chambers of Commerce and Industry (FICCI) said today (5 December) it was shocked by the Indian government’s decision to suspend its decision on allowing more foreign investment in the country’s retail sector.

“It is a setback and the industry didn’t expect it,” Sameer Berde, assistant secretary general of the FICCI, told just-food.

Berde’s comments came after Indian Finance Minister Pranab Mukerjee called opposition leaders to inform them that the Government had decided to put its plans for reform on hold.

However, Berde remained optimistic liberalisation would come in the end. He stressed the decision was “suspended and not reversed” and added: “It could be implemented after a month or a year.”

The plans have divided India’s food and retail sectors. Some food producers are unhappy with the government’s decision. Bhupender Singh Mann, national president of All India Kisan (Farmer) Co-ordination Committee, said: “It is very unfortunate and government has come under very high political pressure. Foreign retailers would have provided a bigger market for our produce, but the monopolistic traders are more vocal than the farmers.”

However, elsewhere, opponents remained cautious. Uttam Chand Chawla, chairman of the All-India Retailers Federation, said: “I fear that the government might implement the decision after the present parliament session gets over [maybe in the New Year].”

Chawla added that the Indian government might find it difficult “to go back on its commitment” and reverse the decision permanently.

Manufacturers want the time-out to be used to secure general agreement over the issue. B Muthuraman, president of the Confederation of Indian Industry, said his organisation “hoped to see an early consensus on the issue among the political leadership of the country”.

The main opposition Bharatiya Janata Party (BJP) has called for an all-party meeting to be staged at the earliest opportunity.

Berde warned that the suspension of liberalisation “will send a wrong signal to the international business community” and said his group would work to persuade opponents that more foreign investment in the retail sector will not harm India.

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