Politics may slow down FDI in retail in India

The commerce & industry ministry may have complied with Congress president Sonia Gandhi’s directive to study the impact of entry of foreign players in the retailing arena but the political furore may end up slowing down its plans to permit 51% FDI in retailing of specialized products like electronics, electricals and sports goods. Commerce & industry minister Kamal Nath, whose ministry is the nodal agency for FDI policy, said on Tuesday that Indian Council of Research in International Economic Relations (Icrier) has been asked to do a “holistic study” to determine the impact of entry of big players on not just the neighborhood stores but also on consumers, farmers, pricing and dislocation. “We then need to do trade-offs to come to the final conclusion. The study should be done in three to four months,” Nath said. “The question is always big versus small. It’s not FDI versus domestic. FDI is only the colour of the money,” he said. Earlier this month, the Prime Minister’s Office had written to Ajay Dua, secretary in the department of industrial policy and promotion, seeking a comprehensive impact assessment of not just transnational players like Wal-Mart but also of large Indian corporate houses. This was the second letter from the PMO in a span of a month and was prompted by Sonia’s concerns over Wal-Mart’s tie-up with Bharti for cash-and-carry wholesale trading, logistics and back-end operations. Sources said Nath had committed himself to a study conducted even before the latest missive from the PMO when he told the consultative committee earlier this month of his department’s intent to get an impact assessment carried out. Asked about his ministry’s proposal to allow 51% FDI in specialized retailing, Nath said, “I don’t think that the purchase of a hockey stick from one such store affects a kirana store. But then there is no rush to allow them. They can wait for some time.” The statement indicated the government’s willingness to wait for a few months before opening the next retail window for foreign investors due to lobbying to block the entry of large players — both domestic and foreign. Armed with an independent study, UPA may be hoping to argue the case for FDI more strongly. The move to allow FDI in retail, a contentious issue even during NDA’s regime, got a fillip around the time UPA came to power thanks to an earlier report by Icrier which suggested that the entry of large players could be beneficial for the consumer as well as vendors and suppliers.

Courtesy:EconomicTimes
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