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Economy Jun 6, 2012

After political ruckus last time, is retail FDI back on the table?

By Firstbiz Editors

With the economy in the doldrums, the government is once again trying to drum up support for the most contentious reform measure of all- foreign direct investment (FDI) in the multi-brand retail industry.

On Wednesday, various media reports said that Commerce and industry minister Anand Sharma was seeking the help of government allies and the Opposition to support the opening of the multi-brand retail sector to boost the sagging economy.

According to a CNBC-TV18 exclusive, Sharma claimed that more than half the states are in favour of allowing FDI in the multi-brand retail sector. He said that while Mamata Banerjee (Trinamool Congress chief) had strong reservations about the proposal, there are other chief ministers who wanted to open the retail industry to foreign investment. "The states which want to embrace their rights must be respected, those who do not want must also be respected...," he said.

Anand Sharma is seeking the help of government allies and the Opposition to support the opening of the multi-brand retail sector to boost the sagging economy. Reuters

Maybe it will be second time lucky for the government.

The last time it introduced FDI in multi-brand retail (late last year), it fell flat on its face. Opposition to the proposal, which seemed to have been waved through by the Cabinet in a hurry, snowballed so ferociously that the government had to hastily place the proposal on 'pause' in a matter of months.

It will be interesting to see whether events will be any different this time. To be sure, there are enough passionate proponents on both sides of the debate. The government is likely to support the argument that allowing FDI in multi-brand retail will reduce pressure on food prices, which seem to be under constant pressure to soar higher. That's because any multinational entering the country is required to invest in agricultural supply chains, under the proposed FDI norms. Even the Reserve Bank of India had come out in support of allowing FDI in the sector.

Opponents, however, see it as a way for multinationals like Wal-Mart and Carrefour to gain untrammelled power to exploit India's agricultural sector and, by extension, thousands of its small farmers. There are also fears about whether it could put mom-and-pop stores (kiranas) out of business.

Will the debate be any different this time? More importantly, will there be any resolution to the debate? It will be interesting to watch.

by Firstbiz Editors

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