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Govt shuts door on FDI in retail

27-June-2005
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Govt shuts door on FDI in retail

To be used as a bargaining chip at WTO talks.

The government has decided to put foreign direct investment in the retail sector on the back burner, refusing to submit to pressures from multinational giants, including a direct plea from Walmart CEO John Menzer, who was in India recently.

Instead, the government has chosen to go along with the Left parties which have been opposed to it all along. Also, a section of the government is of the view that a decision to open up the retail sector to FDI should not be taken before the World Trade Organisation’s Hong Kong ministerial in December this year as it is an important bargaining chip in service sector negotiations.

“There is no proposal to open up the sector in the immediate future,” officials told Business Standard, adding that the Commerce and Industry Ministry, which dealt with FDI policy, would hold more discussions before finalising.

“The European Union and US see a huge opportunity in the retail sector in India. We can use this as a bargaining chip at the WTO instead of opening it up beforehand,” said an official.

Top retail chains like Walmart, Carrefour and Tesco had met officials to push for FDI in retailing. Walmart’s Menzer, on his visit to India, had even called on Prime Minister Manmohan Singh in this respect.

In its draft Cabinet proposal on the revised service offers to the WTO, the commerce ministry had mooted 100 per cent FDI in retail. This was later dropped following fissures within the Cabinet.

The government also turned down the request of Singapore to open up the retail sector during the recently concluded negotiations on a Comprehensive economic cooperation agreement, which is to be signed on Wednesday.

In an internal note on the retail sector in India circulated among ministries earlier this year, the department of industrial policy and promotion had made a case for allowing FDI in retail, saying any move in this direction would ensure that the domestic players were not unduly displaced and sufficient opportunities were available for the growth of the domestic players.

LEFT TO BOYCOTT UPA MEETINGS

The Left parties have decided to boycott all future Left-UPA meetings over the government’s stand on divestment. CPI(M) General Secretary Prakash Karat said despite continuous opposition from the Left, the UPA government had been persistent in its policy of disinvestment even while retaining 51 per cent equity.

In a letter to UPA Chairperson Sonia Gandhi, signed by all the Left parties, the point is made forcefully.

“There is no scope for misunderstanding here. Navaratnas like BHEL can go to the market for raising capital for their own needs. It is not for the government to sell their shares and appropriate those proceeds.”

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