The BJP-led NDA government may not scrap FDI in multi-brand retail as it had earlier signalled it would, as this could send a negative signal to investors. Instead, the Centre could restrict FDI in multi-brand retail in the country by not letting the Foreign Investment Promotion Board clear any fresh proposals . It is also likely to continue the UPA policy of allowing the states to take a call on whether they want to allow FDI in mom-and-pop shops.
The BJP has been opposing FDI in multi-brand retail in the country and had spoken against it in its poll manifesto. Small traders, who are a significant support base of the BJP, have been vehemently opposing the opening of multi-brand retail to foreign investment.
But Prime Minister Narendra Modi has come to power over a pro-reform agenda, and any move to reverse FDI in multi-brand retail may not go well with investors, particularly foreign investors, at this juncture.Due to positive investor sentiments after the BJP won a majority at the Centre, Indian stockmarkets have hit new record levels mainly on account of the flow of foreign capital. It seems the Modi government is in no mood at present to rock the boat. Foreign investment is also necessary for Mr Modi’s plans to revive the economy and kickstart the investment cycle in the country.
BJP-ruled Rajasthan and Delhi, formerly under the AAP, had withdrawn permission given by the earlier Congress governments to allow FDI in multi-brand retail in these states. The Congress-led UPA government had gone all out to allow FDI in multi-brand retail.
Due to political opposition to FDI in multi-brand retail, the world’s third-largest retailer, Tesco, is the only global player which has shown interest in setting up retail stores in India. Wal-Mart and other global players have till now not applied to enter the multi-brand retail sector in India. The UK-based retailer has proposed to pick up a 50 per cent stake in Trent Hypermarket Ltd, a Tata Group enterprise, to engage in multi-brand.retail trading. The proposal was cleared by the FIPB in the UPA period.
The states which had supported the Congress decision earlier on FDI in retail include Maharashtra, Delhi, Jammu and Kashmir, Haryana, Rajasthan, Uttarakhand, Andhra Pradesh and Assam — all ruled by the UPA then. As per the Centre’s decision, foreign retailers will only be allowed to set up shop in cities with a population of over one million.