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Inside Story
Why are Indians resisting economic reforms?
As the government tries again to push for foreign direct investment, we ask what is spurring massive social resistance.
Last Modified: 21 Sep 2012 07:33

India's coalition government is once again facing political turmoil over new economic reforms approved last week.

The plan includes opening up the country's aviation and lucrative retail sectors to international investors.

The reform plan has sparked nationwide strikes supported by opposition parties and trade unions who say the move is a "betrayal of democracy".

"There is a political motive behind these economic decisions, and the government is risking the collapse of its coalition of numerous parties…in order to show that it's asserting itself and that it's capable of forceful action."

- James Mayner, a professor of Commonwealth Studies

Manmohan Singh, the Indian prime minister, has justified the decision to allow foreign direct investment (FDI) in multi-brand retailers.

He said: "I believe that these steps will help strengthen our growth process and generate employment in these difficult times… I urge all segments of public opinion to support the steps we have taken in the national interest."

India has taken a number of steps to curb its rising budget deficit, starting with efforts to reform the retail sector.

The government wants to allow foreign investment in retail trade, allowing chain-stores like Tesco and Walmart to open megastores.

It has limited the amount of government subsidies on liquid petroleum gas, widely used for cooking, and cut diesel subsidies, causing the price of fuel to rise.

"The central government has made [reforms] a state subject. It means that it's the prerogative of the state whether they want to allow FDI or not. As of now out of the 28 states only nine have shown interest, which means it is not necessary that they have to go in for FDI."

- Chetan Sharma, business journalist, The Economist

Retail is the largest industry in India, accounting for 14 per cent of the country's gross domestic product and around eight per cent of employment.

The size of India's retail sector is currently estimated at around $450bn. The country ranks fifth among the top 30 emerging markets for retail sales.

Inside Story asks: Are these reforms a shot in the arm for India's troubled economy? Is the political fallout likely to overwhelm the shaky coalition that rules the country? And what are the motives behind this new series of retail reforms in India?

Joining presenter Darren Jordan to discuss these issues are guests: Chetan Sharma, an independent financial analyst; James Mayner, a professor of commonwealth studies at the University of London; and Radha D'Souza, an associate professor of law and development at the University of Westminster.

"The vast majority of the Indian market system is very local…in every slum in Mumbai and everywhere else you will find a thriving market, and it meets the slum-dwellers' needs…there are markets everywhere to cater to every level of society."

Radha D'Souza, an associate professor of law and development

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