Monday, November 21, 2011

FDI in multi-brand retail: Will 15-year journey end today?

http://economictimes.indiatimes.com/news/economy/policy/fdi-in-multi-brand-retail-will-15-year-journey-end-today/articleshow/10814091.cms

FDI in multi-brand retail: Will 15-year journey end today?

The UPA's will to push through bold policy decisions will be put to test today when the cabinet takes up the contentious issue of allowing FDI in multibrand retail, with BJP and the Left opposing it vehemently. 

But the move will bring in precious dollars at a time when the economy is slowing, food prices continue to gallop and the government is being accused of policy paralysis . 

It has been a long, torturous journey, one that started when the United Front government led by H D Deve Gowda allowed 100% FDI in cash & carry wholesale trade in 1997. Some called it back-door entry for foreign players into India's retail sector. Nonetheless, it was a tentative baby step towards modernising retail business that led to allowing FDI of up to 51% in single brand retailing in January 2006. 

Department of industrial policy and promotion moved a Cabinet note seeking an increase in the FDI cap. Earlier, it had proposed to increase the ceiling to 74%, but decided to adopt a more aggressive stand. It has argued that companies such as Ikea, which produces mass consumption products and accessories, and prominent luxury brands will set up stores if 100% FDI is permitted. Besides, it has made a case for the increase on the grounds that with full-control over the Indian venture, foreign retailers will have a sizeable presence in India and will be encouraged to source locally. 

The Finance Ministry has has given its consent to the draft Cabinet note on opening the multi - brand retail to foreign investment. 

Describing the move as against the interests of the country, BJP has threatened to launch nationwide agitations against the central government's move to allow foreign direct investment (FDI) in multi-brand retail. 

Party leader and Public Accounts Committee chairman Murli Manohar Joshi said it would harm country's small businesses. 

The decision on FDI in the sector has been delayed in view of concerns that it would adversely impact neighbourhood kirana shops, which account for over 90 per cent of $590 billion retail trade. 

Several global retailers like Wal-Mart and Tesco are waiting in the wings to entry into India's multi-brand retail segment.. 

FDI in retail

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