Settlement of foreign investment in multi-brand retail

The Indian government has approved a 51 per cent foreign equity investment in multi-brand retail businesses. The Cabinet Committee for Economic Affairs of the Government of India made this decision at a meeting held on Friday.

Along with this, the divestment of four public sector companies has also been approved.

Giving information about the government’s decision, Commerce Minister Anand Sharma also said that with this, 49 percent of foreign capital investment in the civil aviation sector has been approved.

voices of protest

It is worth noting that Mamata Banerjee’s Trinamool and Mulayam Singh’s Samajwadi Party, allies of the ruling United Progressive Alliance government, have also been against this government move in the past.

Politically, this is an important decision. The main opposition party, the BJP, and left-wing parties have strongly criticized this move. D Raja of the Communist Party of India told Indian channel NDTV: “The international supermarket chain is an attack on the interests of poor farmers and small traders. Millions of people will lose their jobs.”

On the other hand, Ravi Shankar Prasad of the main opposition Bharatiya Janata Party said this is a very hasty step.

Not only that, the Trinamool Congress, a government ally, has protested vigorously. Party leader Kunal Ghosh said that Trinamool is ready to take any kind of decision if the IED is not withdrawn. The Trinamool meeting will take place on Tuesday where a decision will be made on this issue.

Defending the decision to allow FDI in retail, Prime Minister Manmohan Singh said, “The time has come for major reforms, even if we have to go, we will go fight.” Manmohan Singh also said that farmers will benefit from FDI and jobs will also increase.

However, as soon as the notification in this regard is issued, this policy will enter into force. India’s retail trade is estimated by economic analysts to be approximately $470 billion in terms of annual sales.

Permission to supermarkets like Tesco-Walmart

Economic observers believe this move by the government is a major effort to bring foreign capital investment back into the Indian market.

With this step, multinational companies active in retail like Tesco, Walmart will be able to open their stores in India.

Accepting this, Anand Sharma said, “The purpose of this step is to get foreign capital investment from international brands. But states will have to decide for themselves to implement this step.”

Observers say this means that if some states object, they can stay out of the scope of this decision.

The Indian government has already given the green signal for 51% FDI in single-brand retail businesses.

With that decision, big foreign brands like shoe company Reebok, Ikea furniture and Gucci lifestyle accessories were able to open stores in India with full ownership rights.

When the government was unable to approve multi-brand retail at the time, it was heavily criticized by industry organizations.

‘Pressure from rating agencies’

“If you’re looking for the reason why all these reforms were passed together, it’s pressure from rating agencies,” said Abheek Baruah, chief economist at HDFC Bank, as quoted by Reuters news agency. there is no ‘rollback’, i.e. the decision is not reversed, then the game (to remove pressure from rating agencies) is fair.”

Samiran Chakraborty, regional economist at HDFC Bank, said: “The immediate impact of this will be to improve business and consumer confidence. The government’s intention is to reassure rating agencies… that it is taking the right steps.” This will buy the government time.” Agencies will wait for final data on the fiscal deficit before taking a call on India’s ratings.”

Pinaki Ranjan Mishra, a retail partner at Ernst & Young, told Reuters: “There is no more pressure on states that don’t want to implement it. This should pacify opposition parties and government allies who oppose the government.”

Rajeev Anand of Axis Mutual Fund said, “It is a practical decision rather than waiting for consensus among all states. Some states may implement it now and some may prefer to wait. As far as divestment is concerned, a total figure of Rs 15,000 comes in. crores. First of all, maybe the government can earn this money very easily through domestic and foreign institutional and retail investment.”

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