NEW DELHI // India yesterday opened its retail market to foreign chains as part of a package of controversial economic reforms that came soon after the government announced a cut in fuel subsidies.
The reforms, aimed at boosting the nation's greatly slowed economy, also include allowing 49 per cent foreign ownership of its airlines, selling stakes in four government-owned companies, and allowing foreign investment of up to 74 per cent in broadcasting.
In announcing the changes, prime minister Manmohan Singh adopted a combative tone.
"If we have to go down, we have to go down fighting," Mr Singh told a meeting of his committee of economic affairs.
Earlier plans to open retail to foreigners such as Tesco and Wal-Mart were howled down by local retailers, whose 15 million small, family-run shops may be in jeopardy.
The measures also included selling stakes in four government-owned companies, and allowing foreign investment of up to 74 per cent in the broadcasting sector.
They drew criticism from the opposition and allies of the ruling Congress party, but were broadly welcomed by the corporate sector.
On Thursday, the government lifted the price of diesel by five rupees a litre, drawing protests from Congress allies and opponents.
The fuel price rise was estimated to ease the government's subsidy burden by 203 billion rupees (Dh13.7bn).
Opposition parties in Andhra Pradesh protested against the increases yesterday, while a group of women staged a protest in Mumbai against the government's decision to limit the availability of subsidised cooking gas cylinders.
The All India Motor Transport Congress (AIMTC), which represents about 11.5 million drivers, transporters and bus operators, called for the government to "roll back the price rise".
The Bharatiya Janata Party (BJP), India's main opposition party, also lashed out at the rise.
"The diesel hike will have a cascading effect and prices of all essential things will go up," said Narendra Modi, chief minister of Gujarat and a senior BJP figure.
Even the general secretary of the governing Congress party, Digvijay Singh, voiced fears that the rise could "hurt the farmers and common man".
There was a similar call from the Trinamool Congress, a key ally of Mr Singh's coalition.
"We will not accept it and demand its rollback," said party president Mamata Banerjee, who is also chief minister of West Bengal state.
Ms Banerjee also told NDTV she was "totally against" the retail reforms. She threatened she would "not take a fraction of a second to withdraw support" for the coalition.
Other allied parties, such as the Dravida Munnetra Kazhagam in Tamil Nadu, may feel similarly, and the combined pressure of these coalition partners could yet force some of these reforms to be scaled back.
But Pinakiranjan Mishra, the head of Ernst & Young's retail and consumer practice in India, lauded the changes as being "long overdue".
"This sends a message to the international community that long-term reforms are back on track, that Manmohan Singh is back in business. The reforms are a risk politically but it was a brave thing to do."
The image of Mr Singh's government has been particularly tarnished after the most recent session of parliament, in which no work was conducted as the opposition demanded his resignation over a corruption scandal.
The reforms will boost India's image in the global economy, particularly at a time when ratings agencies are said to be considering downgrading the country's sovereign credit rating.
In June, a report from Standard & Poor's titled Will India Be The First Bric Fallen Angel? warned that "reversals in India's path toward a more liberal economy could hurt its long-term growth prospects and, therefore, its credit quality".
Bric refers to the group of developing nations, Brazil, Russia, India and China.
India's economic growth in 2011-12 slipped to a nine-year low of 6.5 per cent. Inflation rose last month to 7.55 per cent on a 12-month basis, official data showed yesterday, further reducing the chances of a cut in interest rates by the central bank next week.
* With additional reporting by Suryatapa Bhattacharya and Reuters