India not ready for FDI in multi-brand retail

indexSource: Business Standard, Sept 08, 2016

New Delhi: The government on Wednesday said foreign direct investment (FDI) in multi-brand retail trading cannot happen before farmers and retailers are provided enough resources to face market competition.

“My answer is not yet,” Commerce and Industry Minister Nirmala Sitharaman said here on Wednesday. She was replying to a question as to why the government was opposed to FDI in the multi-brand segment of the retail sector.

Issues of last-mile connectivity such as lack of back-end infrastructural support, adequate credit and financial inclusion of farmers and traders remain, Sitharaman said.

She added that if those conditions were fulfilled, then Indian companies would perform well, creating ‘several Walmarts of its own’.

India’s current FDI policy permits foreign players to hold 51 per cent stake in an Indian company, subject to government approval. However, the Bharatiya Janata Party had opposed foreign investment in this segment in its election manifesto.

The previous government had cleared UK-based Tesco’s proposal in multi-brand retail.

In June this year, the government had allowed 100 per cent FDI under government approval route for trading, including through e-commerce, with respect to food products manufactured in the country.On India’s existing free trade agreements (FTAs), Sitharaman said the government had initiated the process of reviewing them. A large section of domestic industry had suggested the trade pacts did not help boost India’s exports, but rather, they led to increasing imports.

One reason for this is the inadequate awareness about such pacts, she said. “Our exporters have not had the opportunity to fully exploit the FTAs to their favour. As a result, many exports that could have happened to these countries have not taken place.”

Adding: “So, we are reviewing the FTAs, along with industry sectors. Industry is participating in it.”

India has implemented these agreements with Asean, Japan, South Korea and Singapore, among others. It is also negotiating similar pacts with several regions, including the European Union, Australia, New Zealand and Canada.

The domestic steel industry has time and again raised the issue of increasing imports from Japan and South Korea and had demanded removal of this commodity from the purview of the FTA.

Sitharaman had earlier said that Indian exporters were unable to exploit the opportunities of alleviating outbound trade due to a lack of competitiveness.

The minister also said the government was committed to improving ease of doing business in the country to the extent that it has removed old laws which did not have any use in the modern context.index.jpg“There was a long list of archaic laws… over 1,200 laws have been taken out of the system because you do not need them,” she added.

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