FM reaffirms govt's commitment to bring 51% FDI in multi brand retail

The Finance Minister, Pranab Mukherjee has reaffirmed his government’s commitment to bring in 51% FDI in multi brand retail and has stated that a timeline for the same could be expected in the upcoming budget on March 16. The Minister has further said that his government is committed to the process of reforms is keen to see India on the path of double digit growth. 

India’s GDP growth is expected to come down to 6.9% in this fiscal from its earlier trajectory of 8-9%. As per the FM, the central bank’s anti-inflationary stance has hurt the country’s economic growth. However FM is confident that the slowdown is temporary and India will be back on the path of high growth soon. Mukherjee has stressed that for sustainable growth can be achieved only when it is broad based and is spread across sectors. FM has also emphasized on improving factor productivity through technological innovations and process reengineering, and has said that the country needs to focus on three key areas - education and knowledge creation, creation and strengthening of a competitive environment to support private enterprise, and a greater focus on research and design in enterprises and institutions of higher learning.

Further, the FM said, government had now put in place the New Manufacturing Policy to give a big push to the manufacturing sector with the objective of increasing its share in the GDP to 25% and create 100 million jobs in the next ten years.

Reiterating his government’s commitment to reforms, Mukherjee has stated that India cannot afford to keep its doors shut at a time when it needs foreign investment the most. FM has further stressed that opening up multi-brand retail to foreign investments is very much on the UPA Government's agenda and a consensus to implement the decision is being worked out.

FDI in multi brand retail will enable entry of large retail chains in India and is expected to benefit consumers by helping address inflation concerns through price reductions due to lesser margins effected by retail giants like Walmart. It is also expected to cut agri-waste by improving the supply chain, bringing in distribution efficiencies, coupled with capacity building and induction of modern technology, also farmers will get a better price for their produce as they will be able to sell their produce directly to retailers, thereby reducing margins for middlemen. Investments in cold-storage and warehousing will ease supply-side pressures thereby easing inflation. However allowing 51% FDI in multi brand retail has been a contentious issue between the government and other political parties. The UPA government has been pushing the proposal saying that it will bring in reforms in the country whereas other political parties, including allies of the UPA government have opposed it vehemently stating that allowing major global retailers would lead to unemployment among the un-organised sector and wipe away the small kirana (mom & pop) shops. The proposal had also drawn protests from the Confederation of All India Traders, which accused the government of not holding proper consultations with traders and hawkers and only meeting a few selected groups.

Given the strong opposition the UPA government had to abandon the proposal in November 2011 but has always maintained that it is only a temporary deferment.