The FDI-in-retail policy is a politically brave move for the BJP | editorials | Hindustan Times
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The FDI-in-retail policy is a politically brave move for the BJP

While there have been efforts by previous governments to divest part of all of the state’s stake in Air India, none has shown as much commitment and intensity as the current National Democratic Alliance

editorials Updated: Jan 11, 2018 19:04 IST
Even while acknowledging that changes in FDI policy should not be equated with big reforms – that description should be reserved for such changes as fundamentally reshaping agricultural or labour markets – this criticism is a tad unfair
Even while acknowledging that changes in FDI policy should not be equated with big reforms – that description should be reserved for such changes as fundamentally reshaping agricultural or labour markets – this criticism is a tad unfair (REUTERS)

One way to look at the changes in Foreign Direct Investment policy announced by the government on Wednesday is as a source of material for Modi to talk about at the World Economic Forum’s annual summit in Davos

As some critics have pointed out, the automatic approval of 100% FDI in single-brand retail comes with new caveats to replace existing ones and which will not be easy to meet for most companies. The clarification regarding real estate broking services not being real estate business is unlikely to mean much – in terms of investment. The only significant change has been the decision to allow foreign airlines to acquire up to 49% in Air India, these critics admit, but we are still far too early in the disinvestment process of the state-owned airlines to make much of this.

Even while acknowledging that changes in FDI policy should not be equated with big reforms – that description should be reserved for such changes as fundamentally reshaping agricultural or labour markets – this criticism is a tad unfair.

While there have been efforts by previous governments to divest part of all of the state’s stake in Air India, none has shown as much commitment and intensity as the current National Democratic Alliance. A consultant has been appointed; the process is expected to start in February; and now, there’s the announcement that foreign airlines can hold 49% as long as control and management is with Indians or Indian companies. Apart from increasing the number of potential bidders interested in buying into Air India, this could also result in the emergence of interesting alliances between Indian investors or airlines and foreign airlines.

As for the relaxation of the policy on retail – it is worth repeating that this isn’t multi-brand retail, which will facilitate the entry of retail giants such as Walmart – it was much needed, and will probably make India a preferred destination for several global manufacturer-retailers who already source significantly from India for their global operations.

Interestingly, the Air India divestment is a politically contentious one (although it isn’t clear how the Bharatiya Janata Party’s ideological parent the Rashtriya Swayamsevak Sangh feels about it). The change in FDI-in-retail policy isn’t as contentious, but it is a brave move because the RSS has always been opposed to it and the BJP’s traditional voter base includes a lot of traders and retailers. The message seems to be that this government will push ahead with progressive economic policies.