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The BJP-led Government may not roll back the Foreign Direct Investment policy on multi-brand retail for fear of sending a negative signal to global investors. But it has decided not to entertain any new applications in the sector.
There are no plans of rolling back the FDI policy on multi-brand retail that allows 51 per cent foreign investment in the sector, a senior BJP member told Business Line adding that “we may not allow today but we can’t say what is going to happen in the future.”
This means that while British supermarket chain Tesco — which recently got the Competition Commission of India’s approval for its joint venture with the Tata group — may have just scraped through, others such as Walmart and Carrefour may have to cool their heels for some more time.
Walmart had decided to defer its decision to invest in India as it felt that the compulsory requirement of 30 per cent sourcing of inputs domestically from the small sector was too stringent.
In fact, Tesco, too, may take its time in investing in stores because it would want to see what happens in key States such as Maharashtra where Assembly elections are due soon.
“Tesco would want the whole mess related to the requirement of State government’s consent to be settled before it brings in money. It has been heavily banking on Maharashtra and Karnataka, and it would want to see what is in store in these two States,” a Delhi-based FDI expert said.
After it settles down and elections in key States are over, the BJP Government may come up with its own FDI policy in multi-brand retail that may be wider in its coverage, the expert added.
The UPA Government had opened up the multi-brand retail sector allowing up to 51 per cent FDI in 2012. Last December, it approved Tesco’s application to invest about $110 million in a 50:50 joint venture with Tata Group’s Trent.
Tesco had already been working with Tata in India for over five years, supporting the development of the latter’s Star Bazaar and Star Daily multi-brand retail stores through wholesale and franchise agreements.
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