India puts retail FDI on hold
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- Published on Friday, 09 December 2011 00:17
INDIA – After much protest from opposition parties, the Indian Cabinet has officially shelved plans to open its retail sector to foreign retailers by allowing investments of up to 51% in multi-brand retail.
The announcement was made in Parliament by Finance Minister Pranab Mukherjee on Wednesday after the government met its coalition allies and opposition parties.
Explaining that the Cabinet decision, made late last month, will be suspended until an agreement is achieved among all, Mukherjee said, "The decision to bring 51% foreign direct investment in retail has been suspended till a consensus is brought among various stake holders."
"The policy will not be implemented without consultation with political parties and chief ministers of various states."
However, 100% foreign direct investment (FDI) in single-brand retail is still allowed. Currently, single-brand foreign retailers can only hold 51% of an Indian joint venture.
The postponement of the government's policy comes after opposition parties – chiefly the right-of-center Bharatiya Janata Party and the leftist Communist Party of India – blocked any business from being done in Parliament in protest against the move. Some of the Congress party's own allies – Trinamool Congress party and Dravida Munnetra Kazhagam – also vowed to prevent any legislative work until the decision was suspended.
After Wednesday's announcement, both the opposition parties and allies agreed to allow Parliament to function normally.
But with the government defeated on a measure that can be implemented by executive decision, analysts are questioning whether India’s retail sector can and will ever be reformed.
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