Business

Indian retail stocks fall on stalled supermarket plans

Protest against retail reform in Bhubaneswar, 1 Dec
Image caption The PM has faced opposition from both inside and outside his ruling coalition

Shares in Indian retailers have fallen after the government put on hold plans to open up the retail market to global supermarket chains, just days after approving the move.

Pantaloon Retail India, the largest in the country, closed down by more than 12%.

There has been widespread political opposition to the reform move.

It has made no official announcement, but the government is believed to be attempting to find political consensus.

Parliament has been paralysed since the reform was announced on 24 November. It will return after a four-day break on Wednesday with Prime Minister Manmohan Singh expressing hope that legislative work could resume.

India's benchmark 30-share index closed down 41.5 points at 16,805.33, a loss of 0.25%. This followed a big rally last week.

Pantaloon was the worst hit of the retail shares, with Trent also closing down - by 3.28% - and Shopper's Stop also suffering.

'No guarantee'

The reform move would have allowed global giants such as Walmart and Tesco to own as much as a 51% stake in a retail chain.

It was seen as positive news for local brands, which would get easier access to international investment.

However, opponents feared the move would severely damage the nation's smaller retailers.

Image caption Opponents fear the move will severely damage smaller retailers

The halt has been greeted with dismay by analysts who believe India needs to attract overseas investment.

"This sends a very negative message to foreign investors," said Arvind Singhal, chairman of Technopak, the India retail consultancy.

"What is worse is that once this reform passes, if it passes, foreign investors have no guarantee that things are not going to be reversed after a year or two."

The Times of India quoted sources on Monday as saying Finance Minister Pranab Mukherjee had called the leader of the main opposition Bharatiya Janata Party, Sushma Swaraj, to confirm delaying the move until consensus was achieved.

The BJP has vowed not to allow parliament to function unless the reform is halted.

The ruling Congress-led coalition has failed to implement many of its promised reforms and analysts say a full U-turn on reforming the $450bn retail market would question its ability to govern.

A key Congress ally who opposes the move, Trinamool Congress party chief Mamata Banerjee, says she has been assured there will be no reform without consensus.

But given the extent of the opposition, it is unclear whether the government will be able to find any workable consensus.

The government has made no official announcement.

Mr Mukherjee simply said: "The official announcement will have to be made in parliament."

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