The stand-off over foreign direct investment (FDI) in multi-brand retail between the Congress on one side and its allies and the opposition on the other has deepened further with the ruling party determined not to roll back the decision.
This means more days lost in Parliament and a rallying point for the opposition on an issue that touches millions of lives.
Virtually the entire political spectrum — opposition, allies and even Congress ministers — questioned the timing of the decision, coming as it does when Parliament has not had a single day of business.
This could stymie the momentum on other expected reforms as an embattled government, facing a series of scandals, seeks to shrug off perception of policy paralysis.
The logjam in Parliament is threatening to derail government's plans on introducing key legislations including the lokpal bill that seeks to establish an anti-graft watchdog to probe corruption by public servants.Stung by the scale of opposition, the government is considering various options including referring the matter to an empowered Group of Ministers for addressing concerns of key allies — DMK and Trinamool Congress — and minor tweaking of rules to protect interests of farmers and small traders.
A regulator specific to the retail sector created through an act of Parliament is another option that the government could consider.
An all-party meeting was held on Tuesday morning to find a way out, but sources said a rollback of the policy, as demanded by the opposition, was unlikely.
Yet, there was a backdoor rollback of the hike in petrol prices after the opposition and allies kicked up a storm.
India's industrialists and investors appear worried that any rollback will send out the wrong message. "It (a rollback) will send a very, very strong and negative signal to the investors. Through this decision on allowing FDI in retail, the government has demonstrated strong commitment to reforms. We will be in for turbulent times, if it is rolled back," Rajiv Kumar, secretary general of industry chamber Ficci told HT.
Commerce and industry minister on Monday sought to dispel doubts about a flood of cheap imports from China and elsewhere in wake of the policy and clarified that global retailers will have to source 30% of their merchandise from Indian small and medium enterprises.
The commerce ministry on Friday had said that 30% sourcing will not be restricted to India because of the country's World Trade Organisation obligations.
Separately, Union commerce minister Anand Sharma also wrote to opposition chief ministers and Members of Parliament (MP), allaying fears about the loss of income and livelihood of small vendors and mom-and-pop stores after the entry of mega stores of transnational corporations.