The planned shutdown on Thursday, backed by the main opposition Bharatiya Janata Party (BJP), is designed to force Prime Minister Manmohan Singh to reverse his decision to allow the likes of Walmart and Tesco to set up shop in India.[break]
The Confederation of All India Traders (CAIT), an umbrella body of nearly 10,000 trade federations, said it would mobilise for the day of defiance against the reforms which have been welcomed by investors and business leaders.
"The small traders will be wiped out once the multinational giants begin their operations in India simply because they operate on a predatory pricing policy to wipe out all competition," CAIT secretary Praveen Khandelwal told AFP.
All shops would be shut and traders would get together to discuss their strategy, he added.
But despite the prospect of strike action and dissent within its own ranks, the left-leaning coalition said it would unveil more measures in the next few weeks in a bid to put some colour into the cheeks of an anaemic economy.
While Finance Minister P. Chidambaram did not give any details on the planned measures, he said he hoped that they would encourage India´s central bank to cut interest rates at its next meeting on October 30.
The Mumbai-based Reserve Bank of India (RBI) left rates unchanged at a meeting on Monday, saying it was still concerned about high inflation.
"I am very confident that between now and October 30, since the government is expected to take a number of additional policy measures and also lay out a path of fiscal correction, the response of the RBI will be far more supportive of growth," Chidambaram told reporters.
After accusations of a policy paralysis, the government made a series of stunning announcements last week, starting with a 12-percent increase in the price of diesel and a reduction in the sale of subsidised gas cannisters.
It stirred things up further by allowing foreign firms, which had previously only been allowed to open single-brand shops, to open multi-brand supermarkets.
As well as meeting predictable resistance from small shopkeeper´ unions and opposition parties, the changes pushed by Singh and his Indian National Congress party have also caused consternation inside the government.
Reports on Monday said that the Trinamool Congress, a regional party from the state of West Bengal inside Singh´s coalition, was likely to pull its ministers out of the government but offer support to the ruling coalition from outside.
"She (party leader Mamata Banerjee) will wait for the next big policy confrontation to withdraw support to Congress-led government at the centre," the Economic Times said on Monday, quoting a senior leader of the Trinamool party.
The response of the markets and business leaders to the reforms has been positive.
Indian shares rose 1.35 percent in early trade, reaching their highest level in more than a year, but they fell back after the central bank announced that the repo rate, at which it lends to commercial banks, would remain at 8.0 percent.
Bank governor Duvvuri Subbarao acknowledged that recent reforms "have started to reverse sentiments", but he said that inflation was still too high.
"For the moment, inflationary pressures, both at wholesale and retail levels, are still strong," he said in a statement.
Moody´s ratings agency said on Monday that India´s reform plans would bolster investor sentiment, but would not significantly improve the state of the government´s strained finances.
Fellow ratings agency Standard & Poor´s also highlighted uncertainty over the implementation of the measures but said that they could have a "medium-to long-term positive impact on the macroeconomy of India".
India´s economic growth has slowed sharply from nearly 10 percent four years ago to 5.5 percent in the latest quarterly figures.
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