“The government is lying that companies like Wal-Mart will generate millions of jobs in India. What about the 50 million small traders and shopkeepers who will be ruined?” said Murli Manohar Joshi, a senior lawmaker with the opposition Bharatiya Janata Party, echoing arguments that have been made in American cities against the mega-retailer.
“Most of Wal-Mart’s goods are made by Chinese companies,” Joshi said. “This decision will mean that Chinese goods will enter India through the back door. It will not benefit Indians.”
The government backed down from allowing foreign supermarkets last year in the face of similar opposition, but it says it will not do so again. On Tuesday, a key member of Singh’s coalition withdrew from the government over the decision — the most politically risky decision Singh has made since India signed a civilian nuclear cooperation agreement with the United States in 2008.
Singh has been widely castigated for failing to push through reforms that the private sector desperately needs and for presiding over a sharp economic slowdown in the years since he came to power promising inclusive growth for the “common man.”
He first began liberalizing India’s economy in 1991, when he was finance minister. Moves to allow investment in sectors such as banking, insurance and telecommunications all generated a similar backlash — even though, analysts say, they helped generate unprecedented economic growth.
“Ultimately, the fundamentals lie in creating competitiveness in our economy. We must have the will to do that,” said R. V. Kanoria, president of the Federation of Indian Chambers of Commerce and Industry. “Progress has to happen. You have to give choice for the consumer.”
India’s retail market is expected to be worth more than $1.3 trillion by 2020, up from $500 billion now, as a growing middle class continues to spend, a recent report by the chamber says. Supermarkets and department stores now serve only 5 percent of the market.
Even so, the government has acted cautiously, stipulating that the decision on whether to let in foreign retailers ultimately rests with individual states and applies only to cities of more than a million people. Just nine of the country’s 28 states have indicated they would allow the retailers in. But those jurisdictions include New Delhi and Maharashtra, home to India’s commercial capital, Mumbai.
“What is everybody protesting about? If you have a problem with it, don’t implement it,” said Rajiv Shukla, minister for parliamentary affairs. “At least allow those states that agree with this policy to go ahead with it.”
Many economists say fears of small shopkeepers being destroyed are overblown. Most Indians still prefer the comfort and convenience of their neighborhood stores to large retail outlets.
“We are not just selling groceries, we have a very personal relationship with our customers,” said Bipin Gupta, 30, owner of a corner grocery called Harshita Store. “We know our customers by their names, know the members of their families, we ask about their health. We give credit. If they call us, we deliver the grocery at their doorstep. Where will they get all this in the big impersonal chain of stores?”
Many farmers support the move, as it promises to cut out middlemen who now take a large share of their profits. They are also pleased that foreign supermarkets are being asked to build cold-storage facilities and other “back-end” infrastructure, a big help in a country where up to 40 percent of food spoils on its way from farm to table.
At one protest in the capital, an elderly store owner wore a garland of garden vegetables and sachets of grains around his neck. A poster showed Singh carrying a giant evil-looking octopus called Wal-Mart and telling a poor Indian family holding a begging bowl: “It is for your development, my poor chaps!”
“Does the government not care for our voices at all?” said Rajesh Bahadur, president of the National Hawker Federation. “The government says it will be good for competition, but how will small businesses like mine compete against the big multinational companies?”
Ron Somers, head of the U.S.-India Business Council, said the decision to allow in foreign retailers was a “huge progressive step” that “will be exactly the catalyst that will revive investor enthusiasm in India.”
Raj Jain, president of Wal-Mart India, said the decision “will allow us to connect directly with the consumer and save them money.”
Still, some analysts cautioned that foreign investment will be slow, because of a shortage of land in congested cities and woefully inadequate power supplies across the country.
“To set up a cold chain, you will need constant, quality electricity supply,” said Barun Mitra, director of the Liberty Institute, a free-market think tank. “These are not things that can be run on diesel generator backups.”