Indian states can avert FDI in multi-brand retail

19 Sep '12

2 min read

The recent decision of the Indian Government to allow up to 51 percent foreign direct investment (FDI) in the country’s multi-brand retail sector has a condition that the consent of state governments would be necessary.

Until now, Congress Party-ruled states of Maharashtra, Haryana, Andhra Pradesh, Assam, Jammu & Kashmir, Uttarakhand, Rajasthan, Manipur and Delhi have announced that they would welcome foreign investments for setting up multi-brand retail outlets in their states.

This would essentially mean that global supermarket chains like Carrefour SA, Tesco PLC and Wal-mart Stores Inc would not be immediately able to open their stores in other states of the union, provided they meet other eligibility conditions.

Even among the Congress-led states, the Government of Kerala has not shown any eagerness to implement the Cabinet decision. The southern Indian state has a strong Communist presence and the ruling party may not want to risk losing in the next elections, analysts say.

Madhya Pradesh, Gujarat and Karnataka, all ruled by the main opposition Bharatiya Janata Party (BJP), have opposed the move terming it as anti-poor.

Other states like West Bengal, Uttar Pradesh and Tamil Nadu, which are all ruled by various regional parties, have also opposed the proposal to allow FDI in multi-brand retail, saying the policy is anti-people and would annihilate small traders.

In short, the condition that consent of state governments is necessary for allowing foreign investment in multi-brand retail has brought the number of cities that meet the criteria down to 16 from the original 53 that have a population of one million or more.

Six of these 16 cities are in Maharashtra, followed by three cities each in Andhra Pradesh and Rajasthan, two in Haryana and one each in Delhi and Jammu & Kashmir.

Uttarakhand, Manipur and Assam have no cities with population of one million or more.

Fibre2fashion News Desk - India

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