Govt departs from BJP to let FDI stay in multi-brand retail

FDI in multi-brand retail: Congress, on the other hand, called the government’s decision to continue with the policy as the ‘height of hypocrisy’.

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It was critically important to enhance the credit space available to the retail sector to address its financial challenges, he said. (Reuters)

The Bharatiya Janata Party-led government, releasing its consolidated Foreign direct investment (FDI) policy on Tuesday, stuck to the UPA decision of letting foreign retailers own 51 per cent stake in multi-brand retail in the country.

This is a departure from the stand taken by the Bharatiya Janata Party (BJP) which, in its 2014 Lok Sabha election manifesto, had underlined that “barring the multi-brand retail sector, FDI will be allowed in sectors wherever needed for job and asset creation, infrastructure and acquisition of niche technology and specialised expertise”.

In December 2012, initiating a debate on FDI in retail, BJP leader Sushma Swaraj had described it as the “death knell” for small industries and traders.

The government, however, has decided to continue with the existing policy — it changed the FDI policy for defence, railways and insurance in the first year of its rule.

When asked about this, a senior official with the Department of Industrial Policy and Promotion (DIPP) said that no final decision has been taken on the policy.

“So the existing policy remains,” he said. “As such, proposals above 51 per cent FDI in the sector are subject to government approval and no specific proposal has come to us so far. We will decide as and when it comes,” the official said.

BJP spokesperson G V L Narasimha Rao said: “As a party, we were opposed to that change and our stand remains the same. This was a law enacted by Parliament where it was not backed by the BJP. However, this has become a law and making any change in law would send a negative signal to foreign investors who expect continuity in the economic regime. It could make them feel insecure and jeopardise the investment atmosphere. At the same time,  states have the flexibility to implement or not implement it.”

The Congress, on the other hand, called the government’s decision to continue with the policy as the “height of hypocrisy”.

“This is hardly new or surprising. It has become par for the course for Modiji and his government. Every known acrobatic somersault has been demonstrated on innumerable issues. For the BJP, every issue which has been bad during opposition is good during power,” Abhishek Manu Singhvi, spokesperson for the Congress, said.

Market experts, however, said that continuing with the existing policy will not benefit the sector nor attract FDI since several provisions in the policy are very stringent.

“The current policy does not allow wholesalers to do retail. Also, retailers are not allowed to do e-commerce which is a constraint,” Paresh Parekh, tax partner (retail practice), Ernst & Young India, said.

According to current norms, infusion of FDI beyond 51 per cent triggers the requirement to source at least 30 per cent of value of products from Indian cottage industries. But several global players have made it known that it is not desirable for them to do so.

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First published on: 14-05-2015 at 07:55 IST