Indian government pays political price for opening door to foreign retailers


Trinamool Congress party leader Mamata Banerjee gestures during a press conference in Kolkata, India on Sept. 18, 2012. TMC, a key ally of India's ruling coalition, withdrew its support to protest recent economic reforms, including a move to open the country's huge retail sector. (Bikas Das/AP)
September 18, 2012

A key political ally pulled out of India’s national coalition government Tuesday to protest a decision to allow foreign investors to set up supermarket retail chains here, triggering fears of political instability in the coming months.

Although the move does not immediately threaten Prime Minister Manmohan Singh’s government, it has weakened his coalition and left it more vulnerable to pressure from other partners. It also underlines the political land mines that Singh has to negotiate in pursuing tough economic decisions.

Mamata Banerjee, the mercurial chief minister of the eastern state of West Bengal, had earlier given Singh’s government 72 hours to reverse a slew of controversial decisions taken last week, including raising the price of diesel, cutting back a cooking gas subsidy and allowing companies such as Wal-Mart and Britain’s Tesco to open retail businesses here.

“We are withdrawing our support. . . . We were not consulted in any of these major decisions,” Banerjee, whose Trinamool Congress party was in Singh’s national coalition, told reporters in Kolkata, adding that her ministers will resign formally on Friday. She said millions of people will lose their jobs because of the decision on foreign retail investment.

“Where will these people go?” she said. “There will be disaster.”

Banerjee predicted that Singh’s government will fall in three to six months. But leaders of the ruling Congress party said it might find alternative backing from smaller parties from the northern state of Uttar Pradesh.

“I don’t see an imminent threat to the government because we will find support from other parties,” said Madhu Goud Yaskhi, a lawmaker with the Congress party. “But the problem is that many of these other parties also share the apprehensions about the retail-sector reforms and the partial withdrawal of the cooking gas subsidy. These are not the issues that we can defend in front of the voters in an election if our government falls.”

Janardhan Dwivedi, another Congress party lawmaker, said the coalition will continue to speak with Banerjee about the issues she has raised, but he did not hint at any reversal of the retail reform decision.

Banerjee had derailed an attempt by Singh’s government last year to open the market to foreign retail chains when she threatened to pull out of the government. The plan was suspended in December.

Recognizing the lack of consensus, the government said last week that states would be free to implement or reject the decision. Nevertheless, traders and political parties have called for a nationwide general strike Thursday to protest the move.

Rama Lakshmi has been with The Post's India bureau since 1990. She is a staff writer and India social media editor for Post World.
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