Monday, November 28, 2011


The grand statement by the Commerce Minister of GOI extolling the virtues of opening the retail sector to foreign direct investment through a series of glittering advertisements in almost all news papers to day gives a rosy picture to the citizens about the advantages of major global retail giants coming to India. However a close look at the ground reality will tell a different story.There appears to be a goof up regarding the number of towns with more than a million population eligible for setting up shop by the MNC retail companies and now it turns out that in stead of 53 cities mentioned by the minister, only 46 urban entities exist in the country that are eligible to attract FDI! Besides 25 of the above are under the administrative control of non-UPA governments which are hostile to the new policy leaving only 21 urban entities available to foreign companies to invest. Here is a take on this interesting development for which GOI has to blame itself!

"With Tamil Nadu chief minister J Jayalalitha raising the red flag against FDI in multi-brand retail, nearly half of the 53 cities may slam the doors on global chains. According to the 2011 data on the Census of India website, there are 46 cities that had a population of 10 lakh, of which 25 are unlikely to allow the likes of Walmart, Carrefour andTesco to open stores since the political leadership in these states have gone on the offensive against the government's move to permit global retailers to set up shop in the country. The statement issued by the government after the Cabinet meeting on Thursday had said 53 cities would benefit from the new policy. Apart from Jayalalitha, the BJP-ruled states,Uttar Pradesh chief minister Mayawati, West Bengal CM Mamata Banerjee and Bihar CMNitish Kumar have made public their stand against the latest FDI liberalization move from the UPA, which is keen to shake off the perception of policy paralysis. Among the BJP-governed ones, Gujarat chief minister Narendra Modi has welcomed the opening up. Although in the past, he has been autonomous of the leadership, he is unlikely to deviate from the party's stand. That leaves the foreign retailers to tap into Congress-ruled states such as Maharashtra, Rajasthan, Haryana and Andhra Pradesh apart from Punjab, where BJP ally Shiromani Akali Dal has supported the move, and Orissa". 

Whether the Central Government will be able to survive with some of its coalition partners against the new FDI policy and whether the new policy will be implemented eventually cannot be predicted at this juncture. Assuming that the doors are opened for retail FDI, another million dollar question is how many major players will actually enter the country against the pre-conditions imposed and restricted areas of operation available to them. Any how the road ahead for the foreign companies may not be as smooth as they hope for and it may take years, if not decades, before they can establish any sizable presence on Indian soil!


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