The cabinet meeting on Thursday was stormy to say the least. It is very clear that the government faces opposition from within on opening up the retail sector for multi-brand retail. Besides, allies like Mamata Bannerjee have already expressed reservations. The opposition parties are already gearing up to challenge the government move either in Parliament or the on the street. 

The political opposition to FDI in multi-brand retail may not worry the government. This is because decisions on foreign direct investment do not need any Parliament nod. This can be done with an executive order and the Reserve Bank of India has to implement the policy. A lawyer in Mumbai, who works actively on FDI proposals, said that there is no change of law needed and that the policy can be implemented immediately.

However, Anand Sharma, the minister of commerce, said that states have the right to issue licences. In an interview with NDTV Profit he said that states that choose not to have FDI in multi-brand retail would not have it. 

This is perhaps the most significant economic reform initiative by the United Progressive Alliance government after announcing a nationwide goods and services tax (GST). As it happened in that situation, expect a long wait before you get a chance to hop into a Walmart or a Tesco next door.

Experts have always talked about the implementation of GST adding two per cent to the gross domestic product. Yet, states are bickering to arrive at a consensus on implementation. 

Retail shares surged to new highs on Thursday and Friday in anticipation of the move. Swift reactions from the likes of Reliance Industries, Bharti and others suggest that some movement is better than no movement at all. Many retailers in India seem to be interested in a foreign partner to gain access to the technology and supply-chain processes. Hence, the enthusiasm is high.

However, if states do not agree on opening up the sector simultaneously, it could cause distress to existing companies in the space. For example, if a foreign company buys 51 per cent in Pantaloon Retail, which is one of the largest multi-brand retailer, it would put the company in a spot. This is because some states may quickly allow FDI and some may stall it completely. So most of these companies would have to split their operation between FDI-compliant states and non-compliant. This could just make things difficult to say the least for existing companies. So shareholders and investors need to hold on to their exuberance.  

It is true that benefits far outweigh costs of organised retail. Over the years, wholesale prices go down like in US, the biggest market for organised retail. 

The best ally the government has at this juncture on the issue is the Reserve Bank of India. RBI governor D Subbarao made a statement in favour of the policy and said that it would help bring down inflation and improve the supply chain infrastructure in the country. 

If any debate happens in the Parliament, expect the government to use inflation as a shield to justify opening up the sector. The dramatic fall in the value of the rupee is also pushing the government to act swiftly. Inflation is a far bigger enemy of a politician than anything else. With elections in key states next year, the government appears keen to taken on inflation. For now, it makes sense to fight inflation than resist reforms.