In the backdrop of West Bengal chief minister Mamata Banerjee's disclosure on Saturday that the federal government has put on hold, pending consensus, the decision on foreign investment in retail, stakeholders maintained that a reversal now will be a major setback.
A conflicting signal also emerged soon after Banerjee's comment in Kolkata when commerce minister Anand Sharma said there was no question of any hold or roll-back of the decision to open India's retail trade industry to overseas investors with caveats.
"Right now a signal has gone out to international companies that India has a long-term plan for developing its retail industry and the back-end operations," said Alessandro Fichera, senior partner at corporate consultancy firm Octagona.
"But back-tracking will spoil the investment sentiment," Fichera, whose firm also gets foreign companies to invest in India, told IANS on the sidelines of a two-day conference on franchising and retail.
His remarks come against the backdrop of Banerjee's comment that she has the assurance of finance minister Pranab Mukherjee that the decision regarding 51% foreign equity in multi-brand retailing and 100% in the single brand format is on hold.
"I have spoken with Pranab Mukherjee twice today (Saturday). I have told him that our position on foreign investment in retail remains the same," Banerjee told reporters in Kolkata. "He has told me that government has suspended the decision till consensus is evolved."
But soon thereafter Sharma, who had met with a group of farmers to garner their support for the policy decision, maintained that the government was firm on its decision. "There is no question of any roll-back."
According to Asim Dalal, managing director of niche apparel and furniture outlet, The Bombay Stores, back-tracking on the issue of foreign equity in retail now will send wrong signals on the continuity of reforms.
"We were expecting this to be a groundbreaking reform. Political brinkmanship is ruining everything. The government must not succumb to political pressures. This is a move that will help farmers and consumers."
Ficheria said one of the intentions of the new policy was to ensure that 50% of the investment goes into back-end operations and cold chains. This, he said, would go a long way in reducing wastage of farm produce, which can be as high as 40%.
"Every foreign investor coming to India in the retail trade business is well aware that he has to create the back-end operations. When $100 million is the minimum investment, you are also sure that only serious players will enter. India needs this investment."
Snehal Vashi, vice president of operations with the chain Mom and Me of Mahindra Retail, said another important part of the new policy is on sourcing. As much as 30% has to be from small and medium enterprises.
"The sourcing clause in itself will create a huge amount of jobs. This is something one cannot ignore. At the same time, studies elsewhere have already shown that even if you open 50 Wal-Marts, it will not affect the small neighbourhood stores."