Strike Shuts India Shops as Opposition Protest Retail Plan

Shops and businesses across India remained closed as traders supported a daylong strike called by the opposition to demand the government scrap decisions to raise diesel prices and allow foreign retail chains to set up stores.

The nationwide protest adds to pressure on Prime Minister Manmohan Singh two days after his largest political ally said it will quit the government, leaving the ruling coalition short of a parliamentary majority. While at least one member of Singh’s alliance of about a dozen parties backed the stoppage, other regional leaders are not, limiting its impact.

“The discontent among the people against the government is very high,” said Nilotpal Basu, a leader of the Communist Party of India (Marxist), which is supporting the strike. “The protest is widespread.”

The agitation is the latest test of Singh’s determination to push through the biggest opening of India’s economy since coming to power eight years ago as he seeks to combat a slowing economy. Owners of family run stores, the backbone of an Indian retail market which employs about 250 million people, fear they will be forced out of business by the arrival of big overseas companies.

Shopkeepers in states including Delhi, West Bengal, Tamil Nadu, Andhra Pradesh and Maharashtra joined the strike today. Protesters squatted on rail lines in Uttar Pradesh and Bihar, while people blocked roads by burning tires in Punjab, footage on the news channel NDTV 24x7 showed.

Cabinet Exit

In a surprise move last week, Singh’s cabinet allowed overseas retailers such as Wal-Mart Stores Inc. (WMT) and Carrefour SA (CA) to own as much as 51 percent in supermarket ventures. An earlier attempt to allow foreign companies to open outlets ended in a humiliating defeat for the government last year because of opposition from rival parties and coalition allies led by Mamata Banerjee’s Trinamool Congress.

The government published the rules allowing foreign investment in industries including multibrand retail, aviation, broadcasting and power exchanges, making them effective immediately, according to a statement today from the Ministry of Commerce and Industry.

Banerjee, chief minister of West Bengal state, Sept. 18 announced her party was exiting the government and will pull its ministers from Singh’s cabinet tomorrow unless the retail move and a 14 percent increase in diesel prices are reversed.

A fierce opponent of communist groups like Basu’s, Banerjee didn’t support the strike and state-run bus and rail services operated normally in Kolkata, West Bengal’s capital.

Finance Minister Palaniappan Chidambaram ruled out backtracking on the burst of policy making -- which also included allowing foreign airlines to own minority stakes in local carriers -- arguing it’s needed to revive confidence in an economy growing at near the slowest pace in three years.

Delhi Speeches

Singh’s main rival, the Bharatiya Janata Party, cites job losses as a central reason for its opposition to foreign investment in retail, a proposal it first suggested when in power.

In the southern state of Tamil Nadu, labor unions affiliated to the Dravida Munnetra Kazhagam, Singh’s ally in the province, supported the strike. In Hyderabad, the capital of Andhra Pradesh state, opposition parties prevented buses from running, while schools and shops were closed in many parts of the city.

To contact the reporters on this story: Bibhudatta Pradhan in New Delhi at bpradhan@bloomberg.net; Andrew MacAskill in New Delhi at amacaskill@bloomberg.net

To contact the editors responsible for this story: Hari Govind at hgovind@bloomberg.net; Peter Hirschberg at phirschberg@bloomberg.net

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