Retail hypocrisy PDF Print E-mail
Monday, 18 May 2015 05:52
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What is the policy on FDI in retail and e-commerce?


The government’s stance on FDI in multi-brand retail is disingenuous at best. While the BJP manifesto had opposed FDI in multi-brand retail, the government did not change the law to stop this in the last 12 months. That made many believe this was reform by stealth, that while the BJP didn’t want to openly advocate FDI for fear of hurting its trade constituency, it wouldn’t stop it from coming in since the policy had allowed it. This view was further strengthened when the industry ministry’s compendium of FDI policies listed retail as a sector where this was allowed. After this, however, commerce minister Nirmala Sitharaman has said the BJP remains opposed to FDI in retail and that no change has been made in the policy. In which case, investors need to know what the policy is. If the BJP’s political view is different from the government’s policy, which finally prevails? If the BJP wants to keep FDI out, why not just change the rules? It cannot have a policy that says FDI is welcome and yet not welcome it at the same time. Indeed, the same goes for individual BJP states. Since the final decision on allowing FDI was to be left to the states—the central government policy was merely a facilitating one—there is lack of clarity on this. When Maharashtra was ruled by the Congress, it welcomed FDI; what the Devendra Fadnavis government’s policy is now needs to be spelled out in detail.

The policy on FDI in e-commerce is even more worrying since, in this case, several billions of dollars have already been invested. The official policy allows FDI in B2B ecommerce but not B2C, and there is ambiguity over where the marketplace model fits in. Given the investment being made, once again, investors would expect the government to come out with a clear policy, but this has not been done for the last 12 months. It is only now that some discussion is taking place. Given the potential the sector has to create jobs, to attract investment, to offer marketing help to SMEs, and to change the face of retail in the country, the government needs to come out with a clear policy very soon. How are big investors, both private equity ones as well as big players likeAmazon to react if, after taking no action for a year, the government turns around and brands this out of bounds. The government can’t be running with the hare and hunting with the hounds.


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