Foreign retail chains get green light

The UPA government has taken its major big-ticket reforms measure of opening the country’s retail trade by allowing foreign direct investment (FDI) in the retail industry. The Cabinet on Thursday approved 51% FDI in multi-brand retail and increased the FDI cap to 100% in single-brand retail.

Details of the decision and the reasoning behind the decision have not been made public either through a briefing by a minister or through a Cabinet note. According to officials, when Parliament is in session, decisions which have a bearing on policy are first announced in Parliament.

The government has used the crisis of the falling rupee, which touched its lowest level of Rs52 against the dollar in the last few days, to take the politically controversial economic measure. The Bharatiya Janata Party (BJP) and the communist parties — the Communist Party of India-Marxist (CPI-M) and the Communist Party of India (CPI) — from the opposite ends of the political spectrum united in expressing their unqualified opposition to the opening up of retail trade to foreign players through the FDI route.

A senior BJP leader had said that prime minister Manmohan Singh was worried that the buoyant foreign exchange reserves would deplete because of the falling rupee, and the only way to avert a foreign exchange crisis is to open up the retail sector so that foreign fund flows into the country would not dry up.

Congress allies in the UPA such as the Trinamool Congress have expressed their reservation.

Even Nationalist Congress Party (NCP) leader and agriculture minister Sharad Pawar who is favour of FDI in retail in principle had said a few months ago that it was a delicate issue. He said that while farmers are likely to benefit from this, the retail sector would be affected. He said that a decision has to be taken keeping in mind the interests of all sections.

The Left parties are likely to raise its voice against the UPA government’s decision on FDI in multi-brand retailing on Friday during zero hour in Parliament. “I have lots of material on the subject and will raise the issue during zero hour if the Cabinet clears the proposal today,” CPI(M) parliamentary group leader Basudeb Acharia told DNA.

While Fridays are usually reserved for private members’ business and there is little room for debate on policy issues, the Left appeared keen to make the most of the time they may have at hand.

Anticipating the government’s decision, the BJP had prepared a joint statement of its leaders in the two Houses - Sushma Swaraj (Lok Sabha) and Arun Jaitley (Rajya Sabha) — stating their opposition to the measure. “The BJP is opposed to FDI being introduced in the retail sector,” the party note said.

Pre-empting  that the government will defend its decision, the party said: “The argument that India needs a supply chain in order to help the farm sector and only foreign players can supply the same is to be rejected…Why can’t the same be done by the governments in India, both central and states? Are you going to hand over our food supplies to foreign hands merely because governments have failed to create cold chains?”

Both the BJP and communist parties are aware that as the decision to allow FDI into retail does not involve parliamentary approval, all that they can do is raise their concerns and voice their strong dissent, and take it to the people.

Apart from approving FDI in multi-brand retail, the Cabinet also gave its nod to a revised Companies Bill. The bill will replace the 55-year-old old legislation that seeks to tighten norms on insider trading, prevent corporate frauds and introduce new concepts like class action suits.