PM defies calls for rollback of FDI in retail sector

NEW DELHI: Fighting-off demands for a U-turn on allowing foreign investment in supermarkets, Prime Minister Manmohan Singh said on Tuesday that the policy would bring jobs and technology to farmers.

"I am confident that foreign direct investment in retail will help to bring modern technology in the farm sector, less wastage and more jobs," he said at a rally. Opposition parties and UPA allies are demanding a rollback of the reform allowing foreign supermarket giants to enter the country's $450 billion retail market.

Parliament is in deadlock over the issue, clouding the outlook for an ambitious agenda of legislation, including an anti-corruption bill and another on food subsidies for the poor.

Shares slipped 1 percent as investors took fright of political opposition to opening up the retail sector to multinationals, which could further slow down dwindling growth and hit investment.

K.K. Mital, head of portfolio management services at Globe Capital Markets, said the deadlock dashed expectations the ruling coalition, which has been blamed for policy paralysis after a series of corruption scandals, would pursue more reforms.

"This has affected the sentiment," he said. "There are also some concerns about the GDP numbers due tomorrow."

The new regulations don't require parliamentary approval, but to set up shop, foreign retailers such as Wal-Mart and Tesco must get approval from the government of the state where stores will be located.

As the argument raged, Ikea chief executive Mikael Ohlsson visited India to evaluate the new rules. He could make an announcement regarding Ikea's investment plans as early as Wednesday, Ikea spokeswoman Josefin Thorell said.

Ikea has long wanted to come to India, but declined to do so under the old investment rules, which required it to work with an Indian partner.

Commerce Minister Anand Sharma has said that the change will be a boon for both consumers and farmers rather than a threat to small store owners. He said the new rules would edge out unscrupulous middlemen who eat into the profits of the small farmers.

Sharma said it would also bring down the cost of food for everyone, eliminate spoilage that claims up to 40 percent of all fresh produce, and create millions of jobs.