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FDI: Good policy, bad timing

"You could have taken this decision on December 23 immediately after the conclusion of the Parliament session which would have been an ideal Christmas gift from your side to Walmart" is what a senior opposition leader told commerce and industry minister Anand Sharma on Monday. Nagendar Sharma and Saubhadra Chatterji report.

delhi Updated: Nov 28, 2011 23:45 IST

"You could have taken this decision on December 23 immediately after the conclusion of the Parliament session which would have been an ideal Christmas gift from your side to Walmart" is what a senior opposition leader told commerce and industry minister Anand Sharma on Monday.

This statement apparently summed up the mood within the parliament complex and political circles on how a bold decision of economic reforms to push for the 51% foreign direct investment (FDI) in the retail sector became a victim of bad timing and management.

The government, which was keen to shake off the inertia that had gripped it in the recent months by this policy decision, which has a potential of massive employment generation and also could help it in winning back the middle class support for the UPA, is now struggling for damage control. The FDI decision seems to be clashing with the government's move to get 33 bills passed in the winter session.

Not only the opposition and its allies, some of the cabinet ministers belonging to the Congress are at a loss of words to explain what led the cabinet to clear this politically-volatile policy when Parliament is in session and the government had already enough issues to grapple with.

"What to do now? The impact of the decision is likely to be felt for a long time - politically let us see how it goes," said a senior minister. The series of flip-flops by industries minister Anand Sharma on the issue have not helped either. It began with Sharma exuding confidence before the crucial cabinet meeting that he would be able to convince Trinamool Congress chief Mamata Banerjee about the move.

He met Banerjee at Pragati Maidan and tried to get her on board. Sharma later described her as a "friend and old colleague." During the cabinet meeting, when railways minister Dinesh Trivedi registered his party's objection, Sharma told him the matter had been settled with his boss.

Trivedi was not alone, several Congress ministers, including AK Antony, Vayalar Ravi, Jairam Ramesh and Virbhadra Singh also voiced concerns about going ahead with the decision. The move, however, did not turn out to be the way the government's managers had thought. Banerjee went public with her disapproval and her MPs joined the opposition parties' protest in both the houses of parliament. This was followed by the confusion on how to protect the small and micro enterprises (SME) from the impact of big foreign retail players entering the Indian market.

In his press conference, Sharma had on Friday said the mandatory condition of doing 30 % purchases from the small and micro enterprises for those entering the retail market was not restricted for Indian SMEs.

He attributed this to "World Trade Organisation obligations". The statement immediately led to criticism that retail giants likely to enter India would be free to do their purchases from SMEs abroad, including those in China.

After three days of confusion, the government on Monday clarified that "sourcing of a minimum of 30% from Indian micro and small industry having capital investment of more than US $ one million has been made mandatory."