AAP strikes down FDI in multi-brand retail

Delhi state’s newly-elected government of the Aam Aadmi Party (AAP) has stirred a hornet’s nest by withdrawing approval for foreign direct investment (FDI) in multi-brand retail.

The withdrawal of the approval, given by the previous Congress government, on Tuesday evoked concern and anger among votaries of India’s post-1991 economic reform which envisages opening up the country to foreign investment across several areas of the economy.

Chief Minister Arvind Kejriwal clarified his government was not against FDI in principle, but that he was committed to honouring the party’s manifesto which promised to examine investments on a sector-to-sector basis.

Agencies quoting Kejriwal said though allowing FDI in multi-brand retail would improve consumer’s choice to a great extent, experience world over showed that it “leads to loss of jobs to a very large extent”.

“There is huge unemployment in Delhi and AAP government does not wish to increase this unemployment. Delhi is not prepared for FDI,” reported agencies quoting him.

The decision of the AAP government stalls the reported move by international retail chains like Wal-Mart and Tesco to move into Delhi. 

The FDI policy, allowing 51 percent investment by foreign multinationals in the Indian retail trade, was approved by the federal  government, but state governments have the final say whether they want to implement it in their regions.  Besides Delhi, at least seven other governments had cleared the policy in their states.

Industry bodies upset

A section of the Indian industry reacted with dismay at the decision of the AAP government. “It is unfortunate that the Delhi government has chosen not to allow FDI in multi-brand retail in Delhi. This will discourage international retailers planning to enter India,” said agencies quoting chairman of Confederation of Indian Industries’ National Retail Committee J Suresh.

Reports quoted another industry body Assocham as saying: “If one party reverses the decision of its rival dispensation upon change of guards, the policy and political risks for global investors would definitely increase in India, scaring them away”.

FDI in retail has been a controversial issue in India with those opposed to it saying it will affect millions of small and medium retail traders across the country. 

Those in favour say both foreign chains and Indian “mom and pop” stores can exist alongside each other, and that external investment will bring in much-needed modernisation and choice for consumers in the sector.

The AAP’s decision to bar FDI is the latest in a string of decisions that has had the nation sit up and take notice.  Among its most-discussed decisions have been: setting up an anti-corruption hotline, paring down of security and government perks for ministers and cutting down the cost of power and water for all Delhi residents.