Panel Decided against Making Suggestion on FDI in Retail Sector

A government panel that was set up to examine whether to allow foreign direct investment (FDI) in multi-brand retail, in December 2010 decided against making any suggestion. The panel included officials from the finance, agriculture, commerce and industry ministries and is chaired by an additional secretary in the consumer affairs ministry. It is expected to propose wider consultations on the issue. The panel’s decision will deter any policy decision on opening up the organised retail sector in India. Multinational retailers such as Wal-Mart and Tesco , who have been waiting to enter the world's second-fastest growing major economy have thus suffered a set-back.

The panel was set up by the Indian government to examine the responses to a discussion paper on allowing FDI in multibrand retail as well as suggest a policy framework. India does not allow FDI in multi-brand retail, it however allows 51% in the single-brand sector. Of the total 180 respondents to the discussion paper 65 were in favour of opening the retail sector while the idea was opposed by 113.

India is under international pressure to liberalise the organised retail sector. US president Barack Obama during a visit to India in November 2010 had called upon India to remove caps on foreign investment in sectors, including retail. France also sought opening up of the sector in official meetings during the visit by president Nicolas Sarkozy in December 2010.

There was a view within the department of industrial policy to keep the FDI cap in the sector at 51%, however the discussion paper did not suggest any cap. Bharatiya Janata Party (BJP) and the Left parties are opposed to opening up of multi-brand retail. A parliamentary standing committee headed by BJP leader Murli Manohar Joshi recommended a complete ban on FDI in retail. However, the ministries of agriculture, food processing and consumer affairs, and the Planning Commission have supported opening up of the sector. On the other hand ministry of small and medium enterprises suggested a cautious approach and called for conditional liberalisation of the sector.