India suspended its decision to allow overseas retailers including Wal-Mart Stores Inc. to open supermarkets, a blow to Prime Minister Manmohan Singh’s efforts to boost foreign investment.

The government reversed its decision Wednesday amid protests by the opposition and its allies that forced repeated adjournments of parliament for the last two weeks.

“This is political suicide on the part of the Congress government,” said Surjit Singh Bhalla, chairman of New Delhi-based Oxus Fund Management. “The only conclusion one can draw is that this government has lost any moral authority to lead. It is completely inexplicable.”

The move underscores the failure of Singh’s government to implement economic changes sought by business leaders during its second term. The government faced resistance to its decision to allow foreign direct investment in multi-brand retail from two coalition partners, opposition parties and traders, who say the move will wipe out the jobs of small shopkeepers.

Finance Minister Pranab Mukherjee told parliament today the decision is suspended until a consensus is reached. Harsh Mariwala, president of the Federation of Indian Chambers of Commerce, said in a statement today the decision was “deeply disappointing” and “highly regressive.”

In an attempt to kick start an economy that expanded at the slowest pace in two years, Singh had approved overseas companies including Carrefour and Tesco Plc to own as much as 51 percent of retailers selling more than one brand, adding riders to benefit the local economy.

Singh and Commerce Minister Anand Sharma say the proposals to allow foreign investment in India’s retail sector would check inflation above 9 percent by reducing the amount of farm produce that currently rots before it can be sold and bring better prices for farmers.

Facing at least five regional elections next year, including one in Uttar Pradesh, India’s most populous state, the government may refrain from taking controversial decisions in the run up to the contests, said Laveesh Bhandari, a director of Indicus Analytics, an economics research firm in New Delhi.