The Indian state of Rajasthan has barred foreign direct investment in supermarkets, an ominous sign for global retailers who covet India's vast but fragmented retail sector if the country's main opposition Bharatiya Janata Party (BJP) comes to power nationally in upcoming elections.
The BJP is considered to be more investor-friendly than India's ruling Congress party but opposes foreign direct investment in supermarkets because of its impact on small shopkeepers. It unseated Congress in Rajasthan's state elections in December.
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The Associated Chambers of Commerce and Industry of India criticised Rajasthan's policy reversal, made on Friday, saying it would "dent and shake" global investor confidence.
"If one party reverses the decision of its rival dispensation upon change of guards, the policy and political risks for global investors would definitely increase in India, scaring them away," D. S. Rawat, secretary general of ASSOCHAM, said in a statement.