The Centre is unlikely to tweak the existing policy on Foreign Direct Investment (FDI) in multi-brand retail, though it recently allowed the same in single-brand retail.
According to sources, there is no proposal to review the existing policy which permits 51% FDI in multi-brand retail. In 2012, the then Manmohan Singh government took the decision, which led to massive protests inside and outside Parliament. Since then, the Bharatiya Janata Party (BJP) has been opposing the move, saying it will hurt the interests of local kirana traders. The party also promised that the notification would be withdrawn if it came to power.
Post-2014, though the NDA government has not scrapped the proposal, international brands have not made any investment in the last about four years. As per the policy, it is up to the states to allow companies to set up units under their territories. Since most of the major states are ruled by either BJP or NDA, no investment has come under multi-brand retail. For all practical purposes, it has remained a non-starter.
Interestingly, there have been demands from several quarters in the past to review the policy on multi-brand retail. The Ministry of Food Processing Industries, headed by Harsimrat Kaur Badal, has been pushing to partially ease rules for companies which would allow them to sell soaps, shampoos and toothpastes, along with food products. However, the Ministry of Commerce and Industry has not been keen about it, said a source.
Most of the states, including Delhi, have not shown eagerness to implement FDI in multi-brand retail. At the same time, no company has shown any interest or willingness to invest in this sector, despite the fact that technically it is “open”. So in a way it’s a “non-starter” policy. According to sources, that is the reason why the Centre is not in a hurry to scrap it and wants to maintain status quo.
As the policy has been a non-starter, some of the foreign retailers have either closed down or curtailed operations. In 2013, Wal-Mart ended its India wholesale joint venture after facing troubles where it was investigated for violations of US anti-corruption laws. Carrefour SA, France’s biggest retailer, also closed its Indian wholesale stores in 2016.
Major states like Madhya Pradesh, Chhattisgarh, Gujarat, Tamil Nadu, Kerala, Rajasthan, Uttar Pradesh, Bihar, West Bengal, Odisha and Delhi, have already said “no” to FDI in multi-brand retail.
Regarding the government’s fresh decision to allow 100% FDI in single brand retail, traders say it would open the floodgate for MNCs to overpower Indian traders. The Confederation of All India Traders (CAIT) has decided to strongly oppose the decision.
Praveen Khandelwal, CAIT secretary general, said a meeting of the governing council has been convened in the capital on 3 and 4 February to chalk out future strategy. He said the move will kill the domestic manufacturing sector and will actually be “one step towards allowing FDI in multi brand retail”.