The government’s decision to liberalise FDI in multi-brand retail is being seen as a bold move to spur foreign investment in India. But allowing global retail giants in the country may not bring in the promised dividends.
Call it a coincidence but the underlying irony was hard to miss. On the same day that Prime Minister Manmohan Singh announced his government’s decision to allow 51% FDI in multi-brand retail – signalling a red carpet welcome for foreign supermarket chains – a Washington-based web newspaper carried a detailed story on how Wal-Mart, America’s largest retail chain, has been displacing nearby businesses. The irony was that all along in recent months Singh’s UPA government was fighting to dispel similar concerns being voiced by the Opposition as well as UPA allies on allowing global retailers like TESCO, Carrefour and Wal-Mart to set shop in India. After failing to rally support for greater FDI in muti-brand retail, the UPA government eventually went ahead and issued the notification for liberalising FDI rules in the retail sector on September 20.
What has followed since (apart from the exit of Mamata Banerjee-led Trinamool Congress from the UPA combine) has been a series of high decibel TV discussions and polarised debate over the pros and cons of FDI liberalisation in retail and how it will play out in India. On the one hand, we have the government and the Congress cheerleaders dubbing the move as ‘big bang reforms’. At the other end of the spectrum is the Opposition’s rhubarb decrying the move as retrograde and one which would spell doom for local kirana stores and render a huge chunk of our population jobless.
While some have argued that the government’s hurried push for reforms has been guided by the intent to divert the nation’s attention from the coal scam that saw the Congress-led government cornered, there are others that say that the latest push for reforms comes in the wake of the rapidly gathering perception about the government being stuck in policy paralysis. Reform votaries contend that allowing FDI liberalisation in retail will lay to rest the growing impression about the government’s policy inertia and will to bring in the much-needed foreign investment to India. But whether one chooses to call it a reform or a diversionary agenda, there is no gainsaying that this time around, unlike that of November 2011, the government is in no mood to withdraw its decision. So whether one likes it or not, FDI in retail is here to stay.
The politics that preceded or followed the decision to allow higher FDI in retail misses the key point. The crux of the matter does not lie in the kind of impact assesment that self-proclaimed pundits in the media, the government, the Opposition or the academia have been bruiting about. Also, the government’s defence that the move to allow foreign retailers in multi-brand retail will fix these issues is simply a case of wishful thinking and one that the policy fails to address. That’s because the bottlenecks that have impacted the retail industry in the past are likely to persist in the future as well.
Call it a coincidence but the underlying irony was hard to miss. On the same day that Prime Minister Manmohan Singh announced his government’s decision to allow 51% FDI in multi-brand retail – signalling a red carpet welcome for foreign supermarket chains – a Washington-based web newspaper carried a detailed story on how Wal-Mart, America’s largest retail chain, has been displacing nearby businesses. The irony was that all along in recent months Singh’s UPA government was fighting to dispel similar concerns being voiced by the Opposition as well as UPA allies on allowing global retailers like TESCO, Carrefour and Wal-Mart to set shop in India. After failing to rally support for greater FDI in muti-brand retail, the UPA government eventually went ahead and issued the notification for liberalising FDI rules in the retail sector on September 20.
What has followed since (apart from the exit of Mamata Banerjee-led Trinamool Congress from the UPA combine) has been a series of high decibel TV discussions and polarised debate over the pros and cons of FDI liberalisation in retail and how it will play out in India. On the one hand, we have the government and the Congress cheerleaders dubbing the move as ‘big bang reforms’. At the other end of the spectrum is the Opposition’s rhubarb decrying the move as retrograde and one which would spell doom for local kirana stores and render a huge chunk of our population jobless.
While some have argued that the government’s hurried push for reforms has been guided by the intent to divert the nation’s attention from the coal scam that saw the Congress-led government cornered, there are others that say that the latest push for reforms comes in the wake of the rapidly gathering perception about the government being stuck in policy paralysis. Reform votaries contend that allowing FDI liberalisation in retail will lay to rest the growing impression about the government’s policy inertia and will to bring in the much-needed foreign investment to India. But whether one chooses to call it a reform or a diversionary agenda, there is no gainsaying that this time around, unlike that of November 2011, the government is in no mood to withdraw its decision. So whether one likes it or not, FDI in retail is here to stay.
The politics that preceded or followed the decision to allow higher FDI in retail misses the key point. The crux of the matter does not lie in the kind of impact assesment that self-proclaimed pundits in the media, the government, the Opposition or the academia have been bruiting about. Also, the government’s defence that the move to allow foreign retailers in multi-brand retail will fix these issues is simply a case of wishful thinking and one that the policy fails to address. That’s because the bottlenecks that have impacted the retail industry in the past are likely to persist in the future as well.
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