The Government seems to be aggressively pushing reforms that will help
India attract foreign capital - be it portfolio flows or direct investment.
Even though only six months remain for the general elections to kick
in, Industry and Commerce Minister Kamal Nath is keen to allow FDI in
the politically sensitive retail sector.
Although Kamal Nath has repeatedly denied any plans to allow foreign
companies to foray into multi-brand retail, government officials said
a proposal to allow 49 per cent FDI in multi-brand retail has been circulated
to other ministries. Further, his ministry has also recommended eliminating
the 49 per cent cap on single-brand retail. It has also sought to hike
the FDI limit in infrastructure related to broadcasting to 74 per cent
from 49 to encourage direct-to-home business.
Kamal Nath's efforts to liberalise the foreign direct investment (FDI)
regime, especially in the retail sector, could not fructify since the
Left parties consistently opposed it, stating it would kill the neighbourhood
kirana stores. A study by independent think-tank Icrier earlier this
year said while small stores will be affected immediately, there would
be no long-term impact on the unorganised retail industry.
It is not just FDI that India will benefit from. Along with foreign
investment, the global giants will bring technology for making the back-end
of retailing more efficient. "In fact, it will improve the working
condition of the youth employed in this sector," said an official.
The proposal seeks the Cabinet's approval to allow FDI in multi-branded
retail in electronic items and sports goods. International retail chains
have long been waiting to enter the Indian market given its size. While
foreign retailers will find a huge market in the country's middle class,
in the long-term they are expected to make India a sourcing base for
their global operations. It will lead to major growth in Indian exports,
particularly from the small and medium sectors.
