Centre to lob ball into states’ court on retail FDI

  • Varghese K George and Gaurav Choudhury, Hindustan Times, New Delhi
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  • Updated: Aug 19, 2012 10:11 IST

The Centre is readying plans to empower state governments to decide on the entry of global supermarket chains — such as Walmart, Tesco and Carrefour — to set up deep-discount stores in their respective territories.

A top government source, involved in the framing of the new policy that is likely to be announced in September, told HT: “There will be no national ban on FDI in multi-brand retail. States that are in favour can decide on allowing such stores and those against can impose a ban.”

This is a clear departure from the previous policy that allowed foreign direct investment in multi-brand retail anywhere in India at one stroke. Now, the government believes empowering the states will blunt the political resistance from its key allies and the Opposition.

Last year, political compulsions forced the government to quickly bottle up the move to allow FDI in multi-brand retail, but it allowed up to 100% FDI in the single-brand retail business.

The opposition BJP and the Trinamool Congress, a key ally of the UPA, said multinationals would put neighbourhood mom-and-pop stores at risk. But chief ministers of three states — Delhi, Uttarakhand and Rajasthan — wrote to the Centre, supporting the entry to foreign retailers.

The source said while the FDI limit might be capped at 49%, the new policy would have some of the conditions that were part of the previous policy. It may also stipulate that the foreign investor invest at least $100 million (Rs. 550 crore) in a multi-brand retail project and at least a third of the sales be made to small retailers — either directly or through wholesale units set up for this purpose.

Top Congress sources said the push for FDI was part of an emphasis on the economic front.

The core group of the Congress leadership has given finance minister P Chidambaram a relatively free hand to reverse the slowdown that witnessed the growth rate crashing to a nine-year low of 5.3% in January- March.

"Despite minor differences of opinion on matters of the economy, the mood in the party is to give the finance minister the leeway to work," a Congress leader, not willing to be named, told HT.

He said, "He (Chidambaram) has a difficult job at hand and the leadership understands that. There is no luxury of nitpicking."

 

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