Thursday, July 14, 2011


14 July 2011

From R Rajagopalan

NEW DELHI: With interests of the small traders who form the bulk of its vote bank uppermost in mind, the Bhartiya Janata Party has refused to buy a government proposal to allow the foreign players enter the Indian market with the multi-brand retail.

The government is contemplating a Bill in the upcoming Parliament session for the purpose, believing that FDI (foreign direct investment) in retail would help bring down prices in the long run.

Rajya Sabha Opposition leader Arun Jaitley, however, says his party is opposed to the FDI (foreign direct investment) for two reasons: "First, it will kill the self-employment opportunities that are the single largest creator of jobs and second, it will hit the Indian manufacturing sector leading to more job losses."

The Centre had approached the BJP, the main opposition party, for its support to a the proposed Bill to allow foreigners set up the multi-brand retail shops in India. The Left is opposed to FDI in this sector and hence the government will find difficulty to push through the measure after the BJP putting down its foot.

Jaitley said the government should give a rethink to find out if the Indian economy was in a state to allow FDI in such a key sector at this point of time.

The multinationals may not be able to set up shops in metro cities because of the high real estate prices and so they would venture into smaller cities, thereby squeezing self-employment opportunities and dealing death blows to small shopkeepers, Jaitley said.

He warned that with strong global network, the multinationals are bound to source their products at the cheapest rate from across the world and this would impact demand of the Indian manufacturing sector.

Moreover, Jaitley, who held the commerce portfolio among others during the BJP-led NDA government, said the government is mistaken that the consumer will benefit with cheaper products and multiple choices. He asserted that the government is wrong in assuming that FDI in retail would help bring down prices in the long run.

He said the agenda of the multinationals would be to buy cheap and sell at higher prices after eliminating competition from market by initially offering products at discount compared to the market rate.

Jaitley threw the spanner on behalf of the Bill at a time when the Cabinet was all set to take a policy decision. The Committee of Secretaries (CoS) headed by new Cabinet Secretary Ajit Kumar Seth is slated to meet here on July 22 to prepare a blueprint on FDI in multi-brand retail and resolve the inter-ministerial differences on issues like the regulatory mechanism and capping on the foreign investment.

There is not much difference in the stand taken by the Department of Industrial Policy and Promotion and the Department of Consumer Affairs on the cap to the FDI in this sector. The first wants to allow FDI up to 51 per cent while the latter wants it to benot more than 49 per cent.


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