New Delhi: The UPA government on Friday allowed 51 percent in foreign direct investment (FDI) in multi-brand retail, triggering outrage among some of its allies as well as the opposition.
Ally Trinamool Congress joined the angry chorus of the Bharatiya Janata Party (BJP) and the Left to denounce the move which the government insisted would not hurt Indian interests.
BJP and Communist leaders called the decision a "betrayal" of people's interests.
"This is a complete betrayal, also of parliament," BJP MP Balbir Punj said. Communist Party of India's D Raja said a corruption-tained regime was trying to salvage its image.
West Bengal Chief Minister and Trinamool Congress Mamata Banerjee was furious and said she would not stand for it.
As criticism mounted, Commerce Minister Anand Sharma defended the sweeping policy change, viewed as a major step to spur economic reforms.
"It is not a sudden decision," Sharma told the media, explaining the decisions taken Friday evening by the Cabinet Committee on Economic Affairs chaired by Prime Minister Manmohan Singh.
The announcement paves the way for global retail giants like Walmart and Carrefour to open their stores in India.
The minister said the decision was first taken in November last year but subsequently held back following opposition mainly from the Left, BJP and the Trinamool Congress.
But it was "never rolled back", Sharma clarified.
He said since then the government had held intense discussions with various stakeholders with a view to creating broad consensus. "Ten months is not a sudden decision."
He said among those who were spoken to were farmers associations, civil society groups, regional chambers of commerce and industry as well as state governments.
"I had personally written to every chief minister of the country, spoken to almost all of them.
"There are states which reacted to the proposal very well, some expressed opposition. The response has been a mixed one."
The government said that states which did not favour 51 percent FDI in multi-brand retail were free not to implement the policy.
According to the government, the move comes with some conditions for the investors.
Sharma said multi-brand FDI was expected to generate a large number of jobs in rural India besides giving remunerative prices to farmers for their products.
Political critics were not impressed.
The BJP, whose opposition to the coal block allocations paralysed parliament's monsoon session, vowed to unleash nationwide protests against the FDI unveiling.
This comes a day after the government hiked diesel prices by Rs.5 a litre and limited subsidized cooking gas cylinders to six per year per family.
Those decisions sparked off a volley of protests across all strata of society who fear a cascading price rise.
Minister Sharma, however, denied that the FDI decision was aimed at erasing an impression that the government, under attack over corruption, had gone into a shell.
"There was never any policy paralysis," he said.