In a turnaround from its earlier protectionist stance on multi-brand retail, the BJP-led government is considering opening up the sector to foreign direct investment (FDI) and is trying to get all States on board.
The Department of Industrial Policy & Promotion (DIPP), in the Ministry for Commerce and Industry, is also examining the option of excluding sensitive sectors, such as grocery, from foreign investments in order to protect small retailers and mom-and-pop stores from competition.
"BJP-ruled States as well as Tamil Nadu and Karnataka have expressed interest in allowing foreign investment in multi-brand retail. We are trying to get the consent of States,” a government official said.
Instead, the ruling party discouraged fresh FDI proposals by declaring its opposition to allowing foreign investment in the sector through speeches and statements arguing that it would hurt small retailers. This argument also finds prominence in the BJP’s pre-poll manifesto.
But with changing “economic realities’’, the government’s stance is also going through a change.
“In the fast-growing retail sector, there is space for both large retail stores and the smaller mom-and-pop shops. The government plans to proceed with care to ensure that small businesses are not uprooted. If it comes to that, we will not allow FDI in some sensitive sectors,” the official said.
Sensitive sectors While the DIPP is examining if there is a case to exclude sensitive sectors, such as grocery and food, the Food Processing Ministry recently wrote to the Prime Minister’s Office making a case for allowing FDI in the sector.
“We are still holding consultations on the matter. Nothing has been decided yet,” the official said.
Commerce and Industry Minister Nirmala Sitharaman has held a round of meeting with State industry ministers to get their views on this.
While getting the nod of all the States is not mandatory for allowing FDI in a sector, retailers have to get a licence from a State under the Shops and Establishments Act to open outlets.
To attract foreign investments in manufacturing, it is important to open up the multi-brand retail sector as those who manufacture would also want an easy avenue to sell their products in the country, points out Arpita Mukherjee, professor, ICRIER.
“You cannot be part of the global value chain without opening up multi-brand retail because value chain means end-to-end,” she said.