FDI in multi-brand retail gets support from BJP-ruled states

Written by Nistula Hebbar | Nistula Hebbar | Timsy Jaipuria | New Delhi | Updated: Jun 29 2011, 06:50am hrs
The commerce and industry ministry, after receiving what it terms positive feedback from several state governments on the issue of foreign direct investment (FDI) in multi-brand retail, will be calling a meeting of the Committee of Secretaries (CoS) next month to push it through.

Top sources in the commerce ministry as well as the state governments of Gujarat, Haryana, Maharashtra and Punjab have confirmed that there appears to be a wide-ranging agreement on the issue, even if the politics of the matter is still intractable.

We were particularly heartened by the response of Gujarat and Punjab governments, ruled by the BJP and the Akali Dal-BJP combine, respectively. The Gujarat government, in its response, in fact said that FDI in multi-brand retail would push infrastructure in some areas and help farmers get remunerative prices for their produce, said a top official in the department of industrial policy and promotion (DIPP).

At the national level, the BJP has opposed FDI in retail as it hits the party's core trader vote bank. But these two states, along with the support of the Congress-ruled states of Haryana and Maharashtra, which have strong farmer lobbies, have encouraged forward movement, he added.

FE also spoke to KV Raju, economic advisor to Karnataka chief minister B S Yeddyurappa, who said that while the state government had not sent its response yet, it had not made up its mind either. The BJP's political stance notwithstanding, state governments ruled by it seem to be taking a relook at the matter.

Government officials said that rising food inflation was one of the triggers which could propel the clearing of this proposal. Despite the fact that 100% FDI is permitted in cold chain through the automatic route, there has not been a significant cash flow in this segment, said an official.

Last week, DIPP said in a discussion paper that sectoral caps below 49% be done away with. This allows any investment with an FDI up to this limit to be considered Indian for all practical purposes. If this proposal is implemented, the extant policy outlined in Press Notes 2, 3 and 4, which reckons downstream investments by specified FDI entities as Indian investment, would come to mean that such entities can even invest in sectors like multi-brand retail, where FDI is barred.