In a bid to counter perceptions of policy paralysis, governance deficit and political drift, the UPA government is poised to introduce a slew of long-pending second-generation economic reforms — including allowing foreign direct investment (FDI) in multi-brand retail and permitting foreign airlines to invest in domestic aviation companies — over the coming weeks and months.
These legislative and executive measures are expected to put the economy back on a strong growth trajectory, create millions of new jobs and protect the country from the economic contagion currently sweeping across Europe, North America and some other parts of the world.
The finance ministry has cleared a proposal to allow up to 51% FDI in multi-brand retail, but with a few conditions. This means you may, in the foreseeable future, be able to walk into a supermarket run by global retail giants like Walmart, Tesco and Carrefour in your neighbourhood.
The government has also decided to allow foreign airlines to buy up to 24% stakes in India's domestic carriers-a move that will bring cheer, and, more importantly cash, to the loss-making debt-ridden airlines.
The cabinet committee on economic affairs, headed by Prime Minister Manmohan Singh, will take up the matters of FDI in retail and aviation in the next few weeks after which the policy is likely to be formally notified, a source, who did not wish to be identified, said.
Then, on Wednesday, the government announced that it would allow FDI of up to 26% in pension funds and also set up of a pension regulator. Earlier, India’s wealthiest man and Reliance Industries chairman Mukesh Ambani joined a growing chorus of experts urging the government to push through policy reforms in critical areas at a pace that matched people’s growing aspirations.
Ambani’s comments came weeks after group of 14 eminent citizens, corporate captains and policy analysts wrote their second “open letter” asking the government to speed up reforms and enact strong lokpal bill to bridge ‘governance deficit’.
"There are many measures which the Cabinet can take and that do not require Parliamentary approval. These moves (FDI in pension, retail and aviation) will send out the right signals to investors," Ashok Hinduja, chairman of Hinduja Group told HT.
But politics, as usual, may stymie the government's plans.
The BJP and small domestic traders feel that giant MNC retailers would put the livelihood of neighbourhood mom-and-pop kirana stores and street vendors at risk.
"We have been against this and will continue to oppose it," former finance minister and BJP leader Yashwant Sinha said. "This is going to hurt small retailers badly. Many of them will be forced to shut down shops,” said Praveen Khandelwal, secretary general of Confederation of All India Traders.
But industry leaders welcomed the move. "It (FDI in multi-brand retail) is a win-win situation for all-suppliers, retailers and consumers. Small kirana stores can co-exist with large stores," Kishore Biyani, chairman of Future Group, which runs the Big Bazaar chain of stores, told HT.
Left parties termed the moves to open up India's pension, retail and aviation sector to foreign investors as "neo-liberal" and said they would impact the livelihood millions of small traders.