Story highlights

Traders close shops, stop trains to protest plans to open nation's retail sector to global chains

Protesters also oppose recent fuel price increases, caps on kitchen gas canister supplies

Traders say chains will harm small businesses, but analyst says India's big enough for both

Government: Foreign retailers will aid supply chains; opposition party: Plan must be reversed

New Delhi CNN  — 

Shops and markets were closed and traders stopped trains in parts of India on Thursday in protests against federal reforms to open the nation’s $500 billion retail sector to global supermarket chains.

In New Delhi, traders marched through the streets, shouting “no FDI in retail” slogans, a reference to foreign direct investment. The protests are a backlash against the Indian government’s announcement last week allowing foreign retailers to own a 51% stake in joint ventures in India, which is Asia’s third-largest economy.

Major markets in several Indian cities were closed in the one-day strike, backed by opposition parties and allies of Prime Minister Manmohan Singh’s government who support them. Protesters were also opposing recent fuel price increases and caps on kitchen gas canister supplies.

Traders burned an effigy labeled “FDI in retail” in the Indian capital after a demonstration joined by communist, right-wing and socialist leaders.

Protesters also blocked at least 200 trains across India, some for more than an hour, railway spokesman Anil Kumar Saxena told CNN.

Traders say the arrival of companies like Wal-Mart, Carrefour and Tesco in India will destroy their small businesses.

But a market analyst differs.

“The market in India is big enough,” said Ankur Bisen, a retail expert at the consulting firm Technopak. “It’s about a $500 billion market, and this market presents opportunities for organized retail as well as mom-and-pop stores to coexist.”

Singh’s government, which announced sweeping reforms last week amid massive criticism of its handling of the economy, says foreign retailers will help improve the country’s creaky supply chains.

In India, business applicants must get permission from states to set up shop. The new policy reinforces that rule.

As Singh and Bisen welcome the proposal to allow overseas players in retail, others oppose it.

“These multinationals will ruin millions of small traders,” said Praveen Khandelwal, secretary general of the Confederation of All India Traders, which led demonstrations in New Delhi.

India’s Hindu nationalist main opposition Bharatiya Janata Party vowed it would press for a rollback of the retail liberalization program.

“This is just the beginning. We will continue our struggle till the decision is reversed,” Nitin Gadkari, president of the party, told protesters in his address in the capital.

The September 14 reform announced by the Indian government also cost the ruling coalition a key political ally.

Mamata Banerjee, a maverick politician leading the West Bengal state, announced Tuesday that federal ministers from her Trinamool Congress party would submit their resignations to Singh this week if his government did not scrap the retail policy.

On Friday, the Indian Cabinet also announced aviation reforms, a day after increasing prices of heavily subsidized diesel fuel.

Singh, whose government is under fire over a raft of corruption scandals, sounded firm on policy decisions.

“I believe that these steps will help strengthen our growth process and generate employment in these difficult times. I urge all segments of public opinion to support the steps we have taken in national interest,” he said in a statement after the Cabinet announcements.