Congress defends path of reform in India

Manmohan Singh, India's prime minister, and Sonia Gandhi, the president of the ruling Congress party, took a united stand in front of thousands of young party activists on Tuesday defending their push for reforms in the face of obdurate political opposition.

Mr Singh staunchly defended his controversial decision to open India's retail market to foreign companies, like Tesco, Carrefour and Walmart. He said his government would not reverse one of the boldest economic reforms for years.

The main opposition has threatened to jam an already paralysed parliament indefinitely unless the government rolls back a liberalisation decreed last week. The backlash has heightened uncertainty about whether the plan to relax ownership rules for foreign retailers will stick.

“We didn't take the decision hastily,” Mr Singh told his party’s youth movement at a meeting in Delhi. “We have thought a lot and firmly believe that this decision will benefit us a lot.”

Over recent days, the Congress party’s allies and opponents have launched a wave of protest against a move they say will decimate India's small traders and farmers. The dissent to a move that could unlock as much as $20bn in foreign direct investment has made the ruling coalition look divided.

Mrs Gandhi used her first public speech since returning from medical treatment in the US over the summer to emphasise her party’s credentials as pro-poor at a time of a renewed drive for reform. She also vowed to strengthen anti-corruption measures in response to public outcry over high profile scandals that have tainted the ruling alliance over the past year.

“We need political, administrative and judicial reforms to make headway,” a gaunt Mrs Gandhi told her audience.

But the Italian-born widow of former prime minister Rajiv Gandhi steered clear of any direct reference to the retail reforms, which Mr Singh had insisted would bring new technology and better prices for farmers.

Earlier in the day, Mr Singh failed to break a political deadlock at an all-party meeting over retail liberalisation. Mr Singh had appealed for the opposition to allow parliament in the world’s largest democracy to function after months of bickering and incessant adjournments.

The prime minister struck out at the opposition Bharatiya Janata party’s disruptive tactics, saying a parliament in disarray “betrayed” public trust in elected representatives. “We want to bring laws, but the opposition is not letting parliament run,” he said.

So far foreign retailers have held back on announcing their expansion plans in India. The first one to do so is likely to be Ikea, the unlisted Swedish retailer. Mikael Ohlsson, Ikea’s chief executive, is expected to make its investment known in what would be a prize market for the global home furnishings company on a visit to the Indian capital on Wednesday.

The parliamentary deadlock has alarmed investors. Michael Queen, the chief executive of 3i, the UK-based group invested in infrastructure projects in India, warned of the dangers of political “inertia” to fulfilling India's economic potential.

Sunil Bharti Mittal, the chairman of Bharti Airtel, has warned that India is creating a “serious negative perception” on the global stage.

“While India is not at war from outside, there is certainly a sense that it is in crisis from within,” Mr Mittal wrote in a letter to the country’s leadership.

The Congress party leadership is meeting on Wednesday to discuss its next move, as some of its senior leaders have publicly expressed reservations about encouraging more foreign capital into the protected retail sector.

Others, however, have said India should be “unapologetic” about pursuing a reform agenda to modernise the economy when India’s economic growth rate is falling. P. Chidambaram, the home minister, said the impact of foreign retailers, in a market estimated to be worth $450bn, was being exaggerated. “It’s not going to change the economic landscape of India,” said P. Chidambaram, the home minister, said of the new ownership rules.

Shares of local retail companies, like Pantaloon Retail and Trent, the Tata Group’s retail venture, initially rose in response to last week’s liberalisation. But the uncertainty this week has led to them to retreat in recent days.