New Delhi: Despite the tough talk in the run-up to the elections, the BJP appears to have backed off from scrapping the UPA government’s decision to allow FDI in multibrand retail. It would, however, use administrative processes at FIPB to block any foreign investment proposals in the country.
The change in the government’s strategy seems to have been caused by fears expressed by some sections of the ruling regime that a reversal of FDI would mar investor-friendly image of the Narendra Modi government, a prospect which India cannot afford at this juncture of time.
The new plan would allow the government to keep Indian shopkeepers its core support group happy and also prevent it from sending any negative signal about the new government’s commitment to economic reforms in the country.
This would also help the Centre to reverse its opposition to the FDI by just letting Foreign Investment Promotion Board (FIPB) to give go-ahead to the foreign proposals.
Due to positive investor sentiment after its victory in the Lok Sabha polls, Indian stock markets have hit new record levels, mainly on account of foreign flow of capital. It seems, Modi government right now is in no mood to rock the boat. Foreign investment is also necessary for Mr Modi’s agenda to revive the economy and kick-start investment cycle in the country.
The government could also follow the UPA’s policy of allowing states to take a call on inviting foreign investment in malls, which Indian shopkeepers fear would throw them of business.
The BJP has been opposing the FDI in multi-brand retail in the country and had spoken against it in its election manifesto. The BJP’s government in Rajasthan and former AAP regime in Delhi had withdraw permission given by previous Congress state governments to allow FDI in multi-brand retail in these states.
Due to political opposition to FDI in multi-brand retail, Tesco is the only global player which has shown interest in setting up retail stores in India.
