Foreign direct investment (FDI) in multi-brand retail could turn into a reality at least in a clutch of Indian cities soon, with the UPA government set to revive last November?s Cabinet decision to permit up to 51% FDI in the sector. It will, however, be optional for states to implement the decision; there won?t be any forcing of their hand by the Centre.
In an interview to FE, commerce and industry minister Anand Sharma said that chief ministers of many states, including Gujarat?s Narendra Modi, have expressed their willingness to permit FDI in multi-brand retail in their cities with a population of 10 million and above. Given the level of acceptance of the policy among states, as many as 30 Indian cities will, over the next few months, have supermarket stores owned by global retail giants like Walmart, Carrefour and Tesco.
Clearly hinting at reviving the decision, Sharma made the Centre’s stand clear: ?If some states do not want (the policy shift) then other states (which are keen on it) should not be deprived of that.? The minister said Punjab (which has said so in writing), Haryana, Himachal Pradesh, Rajasthan, Andhra Pradesh and Maharashtra were among the states that supported the policy.
The government reckons that with the Budget session of Parliament coming to a close on Tuesday, it will have the political leeway to put in place the enabling policy framework at the Centre through a press note. The idea is to let states that are keen to adopt the policy for the benefit of their agrarian economies to go ahead and implement it.
Sharma added: ?In the dialogue with state chief ministers, I have reassured them that in any case the trade licences are given by the states under the Shops and Establishment Act? so there cannot be any forcing of the state governments’ hand in the matter.
There are only some 52 cities in the country with a population of 10 million or more and if one excludes states that do not want the policy change, then the number will come down by 20 or so.
The UPA government is determined to revisit the contentious policy decision that Sharma believes is formulated with a definite Indian imprint, as there might not be examples of comparable economies allowing FDI in multi-brand retail. The government reckons that with a looming balance of payments problem and the rupee’s sharp fall, India badly needs foreign capital now and FDI in retail would be a significant avenue for foreign funds to flow in ?I am of this view that it is in our larger national interest that this policy (FDI in retail) which takes on board India’s complexities, diversities and socio-economic realities, is put in place. We are not aping any (foreign) model, we are not juxtaposing something (upon something) either… We are different… The policy has a distinct Indian signature,? he said.
Sharma said the central government was in talks with states that have reservations over the policy because ?we are a federal polity?. ?In a union of states it is better left to the state’s discretion,? he said. ?Now we also have a situation where large states in the country ? large agrarian states ? which want it because they want investment… They want to create infrastructure and a value chain.?
The minister noted that India is now the second largest producer of foodgrains in the world and also the second largest in production of fruits and vegetables. ?Our post-harvest losses in perishables is close to 40% because we do not have cold chains, forget about warehousing, value chains and agri-processing facilities,? the minister said. The consumer pays seven times more than what the farmer gets, and the FDI policy would address this problem, he said.
The proposed policy would come with riders ? 50% of the investment and 50% job creation have to be in rural areas, and the FDI retail outlets will have to source 30% of their requirements from mall and medium enterprises.