Thaindian News

New Delhi, Dec 7 (IANS) Indian industry’s euphoria over the government’s decision to throw open the country’s retail trade to foreign companies gave way to despair Wednesday after the finance minister announced suspension of the plans owing to political pressure from both within the ruling coalition and outside.

India Inc, which had hailed the decision taken last month as one that signalled a movement forward in the reforms process and that would help farmers, consumers, and small and medium enterprises, felt let down and said it sent wrong signals overseas.

“The government decision to hold back up to 51 percent FDI in multi-brand retail and 100 percent in single brand retail is deeply disappointing,” said Harsh Mariwala, president, Federation of Indian Chambers of Commerce and Industry (FICCI).

“It is a highly regressive move. For the growth of this vital sector of the economy which is likely to result in strong linkages with the farm sector and for the economy as a whole. It is imperative that the reforms like these should take place,” Mariwala said.

Finance Minister Pranab Mukherjee said in Parliament that the government was holding back its decision to allow 51 per cent FDI in multi-brand retail.

In a decision taken on Thanksgiving Day, Thursday Nov 24, a meeting of the cabinet presided over by Prime Minister Manmohan Singh had decided to allow up to 51 percent foreign equity in multi-brand retail and enhance the cap on single-brand format to 100 percent.

But with stiff opposition from both within the ruling United Progressive Alliance (UPA), notably the Trinamool Congress and the DMK, as also th logjam in parliament due to an unrelenting opposition, the decision was “suspended” pending consensus.

Expressing disappointment over the issue, Chandrajit Banerjee, director general, Confederation of Indian Industry (CII), said the decision to hold back FDI in retail would have a strong negative impact on investors’ sentiment.

“FDI in multi-brand retail would have multifarious advantages to farmers, micro, small and medium enterprise, consumers and government alike,” he said.

Banerjee expressed hope that there would not be any roll back and a “quick consensus” will be built on the issue. “FDI in multi-brand retail is an important reform agenda and this offers India a great opportunity,” he said.

“Holding back the cabinet decision on foreign direct investment (FDI) in retail due to political opposition is a clear case of missed opportunity that will dent the country’s image as a global investment destination,” leading industry lobby Assocham said.

“It is a clear case of missed opportunity that would have created over 10 million of new jobs in three years, curbed agricultural wastage, benefited farmers with better prices for their produce and brought down prices of many commodities for consumers.”