* Key government coalition ally opposes proposal
* Reform would bring investment, but risks public backlash
* Small shopkeepers protesting feared job losses
By John Chalmers
NEW DELHI, Nov 24 The Indian government's
plan to open its supermarket sector to global retailers hung in
the balance on Thursday as political opposition to the
long-delayed reform mounted just hours before a cabinet meeting
called to approve it.
Multinationals such as Wal-Mart Stores Inc have eyed
India for years as the last frontier in mass retailing -- a
market estimated at $450 billion a year, but still dominated by
traditional family-run and corner stores.
Allowing foreign retailers to take stakes of up to 51
percent in supermarkets would attract much-needed capital from
abroad and ultimately help unclog supply bottlenecks that have
kept inflation stubbornly close to a double-digit clip.
However, a heavyweight party in the coalition government
said it will oppose the proposal at the cabinet meeting, raising
the chances that yet another of Prime Minister Manmohan Singh's
reform plans would be put on ice.
"We are completely opposed to it," said Dinesh Trivedi, the
cabinet representative of the Trinamool Congress party, on which
Singh's Congress party depends for a majority in parliament.
"My suggestion in the cabinet (meeting) will be that an
all-party meeting should be called to discuss this sensitive
matter before taking it up in the cabinet," Trivedi told
Trade minister Anand Sharma said there was "a broad-based
consensus" in favour of the reform within the cabinet, and he
would meet the leader of Trinamool Congress, Mamata Banerjee, to
persuade her to throw her weight behind it.
However, another of her senior party officials said he had
the impression Singh was trying to "bulldoze" the reform
"The foreign companies will start by selling cheap to
attract people and then, within a year and half, increase
prices. This will hurt the poor and all the small traders. This
has to be properly discussed more openly," another said.
Political opponents of the proposal, with an eye to the
ballot box, argue an influx of foreign players -- which could
include Carrefour and Tesco Plc -- will throw
millions of small traders out of work in a sector that is the
largest source of employment in India after agriculture.
"While there has been a lot of consensus, in my view, in the
government, there's been less of a consensus in the political
class," Montek Singh Ahluwalia, deputy head of the Planning
Commission, told CNN-IBN TV this week.
"And, therefore, it's not surprising they have a few more
consultations and take a little more time."
Opening up the retail sector would be one of the boldest
moves to come from Singh's government, which has been tripped up
by a string of corruption scandals over the past year and mired
in a policy paralysis at a time of slowing economic growth.
India currently allows 51 percent foreign investment in
single-brand retailers and 100 percent for wholesale operations,
a policy that the world's top retailer Wal-Mart and Carrefour,
among others, have long lobbied to free up further.
A group of senior civil servants approved the proposal to
open the multi-brand sector to foreign players in July, although
it recommended strict local sourcing requirements and minimum
Even if there are stringent caveats on foreign investors,
the government would still be taking a big political risk ahead
of elections in the most-populous state, Uttar Pradesh, next
India's biggest listed company, Reliance Industries
, was forced to backtrack on plans in 2007 to open
Western-style supermarkets in Uttar Pradesh after huge protests
from small traders and political parties.
The main opposition Bharatiya Janata Party has vowed to
oppose opening the sector, and domestic traders have taken to
the streets this week amid talk the reform could be imminent.
Praveen Khandelwal, Secretary General of the Confederation
of All India Traders (CAIT), which staged protests against the
policy this week, said foreign supermarkets would hurt his
"Definitely, there will be large scale unemployment," he