Govt clarifies sourcing rule for foreign supermarkets

Govt clarifies sourcing rule for foreign supermarkets

New Delhi: Foreign supermarkets wanting to set up shop in India will have to source 30% of their produce from local, small industries, a government statement said on Monday, appearing to change the rule within days of announcing a supermarket policy.

On Monday, the government faced widespread opposition within Parliament from both political rivals and its own coalition allies over last week’s move to allow foreign supermarket giants retailers to enter Asia’s third-largest economy.

Opposing the move to allow store chains like Wal-Mart Stores Inc up to a 51% stake in retail ventures, a wide range of parties said they would use the parliamentary session this week to force the government to backtrack.

The uproar could force a vote on one of the government’s biggest reforms in years. If it loses that vote, in theory it could spark a wider vote of no-confidence in the Congress party-led ruling coalition.

The government coalition has parliamentary majority of roughly 18 seats.

But several of its biggest allies say they oppose the retail reform and Parliament was briefly adjourned on Monday amid scenes of uproar in the lower House.

The retail reform breathed new life into the government of Prime Minister Manmohan Singh, who ushered in free market reforms 20 years ago but has been bogged down by corruption scandals and was starting to be seen as a lame duck.

But it was a politically risky move, coming ahead of major state elections next year that could redraw the political map ahead of 2014 general elections. The opposition claims the retail move will mean millions of small shopkeepers jobs are lost.

As well as appealing to a burgeoning urban middle class, supporters say the reform will draw in much-needed new investment to a sputtering economy.

Policymakers say spending on cold-storage and warehousing will ease supply-side pressures that have driven inflation close to a double-digit clip.

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