FDI in retail: Showdown at today's all-party meet

A showdown appears imminent at today’s all-party meeting convened by the government to discuss the contentious policy on permitting foreign direct investment in multi-brand retail.

On Monday, the beleaguered government, recoiling from the pushback from a united opposition and even from some of the ruling party’s allies, made a concession on its policy, clarifying that the foreign retailers would have to source 30 percent of their inputs from domestic micro and small enterprises (MSEs).

That was a rollback from the press note issued by the government on Friday, which said the foreign retailers could source their MSE inputs from “anywhere in the world”.

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[caption id=“attachment_140617” align=“alignleft” width=“380” caption=“The government’s concession on FDI in retail, announced by Anand Sharma, is unlikely to break the deadlock with the opposition. Reuters”]  [/caption]

Yet, that concession, which Congress spin doctors claim was made on the “advice” of Congress president Sonia Gandhi, hasn’t been enough to blunt the opposition offensive.

On Monday, prime minister Manmohan Singh met Sonia Gandhi and discussed the government’s strategy for today’s all-party meeting. He also secured the formal backing from the Congress party for the government’s decision to allow 51 percent FDI in multi-brand retail, indicating that the government would not rollback the policy in its entirety, as demanded by opposition parties.

On Monday, BJP leader Sushma Swaraj and CPI(M) leader Sitaram Yechury independently demanded that the government withdraw its “unilateral” policy decision on so serious a matter before convening the all-party meeting.

Swaraj even quibbled about the timing of today’s all-party meeting. “The meeting has been called at 9.30 in the morning,” she said . “This leaves us with little time to discuss and debate the issue, before the House convenes at 11.”

Blaming the government for the logjam in Parliament, Swaraj said the government had made a unilateral decision on FDI and that none of the parties, including Congress allies, were had been taken into confidence regarding the decision.

The Left parties too criticised the government for having “bypassed parliament” by taking a policy decision on such a major issue, although parliament was in session.

Yechury said there was “no point” in having a discussion on the matter when a decision had already been taken. The government, he said, should rollback the decision first and then call a discussion - failing which, he said, it would be signalling that it did not want parliament to function.

The concession on sourcing from MSEs was announced by commerce minister Anand Sharma, who tried valiantly to put a spin on it. He claimed that the earlier press note, issued on Friday, which had envisaged sourcing from “anywhere in the world”, had been “misconstrued”.

But in fact, the Economic Times reports, Sharma had on Friday made an eloquent defence of the earlier policy, claiming that restricting retailers’ sourcing to domestic MSEs would fall foul of India’s commitments to the World Trade Organisation.

On Monday, however, following the backlash from the opposition, and even from within the Congress allies’ ranks, the government yielded ground.

To enlist broader support for the government’s policy announcement, Sharma also wrote to chief ministers - including Mamata Banerjee, Mayawati, Jayalalithaa, Nitish Kumar and Naveen Patnaik.

Yet, there are disquieting signs that that the Congress is unable to carry its own leaders on this issue. Indicatively, on Monday, Kerala Congress leader Ramesh Chennithala wrote to Manmohan Singh seeking withdrawal of the decision on FDI in retail.

The extreme politicisation of the decision, in the context of the upcoming Uttar Pradesh elections, came across in Samajwadi Party leader Mulayam Singh Yadav’s fiery rhetoric, echoing BJP leader Uma Bharti’s earlier threat, to set fire to Wal-Mart stores in Uttar Pradesh. “We will burn any such shop in the state,” Yadav said.

Given the polarised views on the subject, it’s unlikely that today’s al-party meeting can achieve any breakthrough on the subject. It’s going to be another rocky day, and Firstpost will be tracking it every minute. Stand by for lots of action.

Additional reading

Official data on FDI in India, available here.

ICRIER policy document on the impact of FDI in retail, available here.

For a critical view of FDI in retail, read this report, prepared by the Centre for Policy Alternatives