So, Parliament is finally set to vote on the contentious issue of whether or not foreign direct investments (FDI) should be allowed in multi-brand retail. The debate in the lower house is likely to be held on December 4 and 5, and will be the first trial of strength in the 15th Lok Sabha.
Speaker Meira Kumar has said that she has received 30 notices for discussion on FDI in multi-brand retail under Rule 184, and has admitted the motion to allow the discussion.
Leader of the Opposition Sushma Swaraj assured that the House would run smoothly after the debate.
Retail reform has hit a rough patch in large part due to the resistance from the Opposition. What is more, FDI has declined by about 20% to $2.26 billion in August compared to the same month in 2011.
The retail sector accounts for over 10% of the gross domestic product (GDP) and is the second largest source of employment after agriculture. Analysts said the FDI in the sector could transform India’s $500-billion-plus retail market and tame inflation.
The Indian retail market, which was around $220 billion in 2005, is now expected to hit $700 billion by 2015.
India’s economic growth slowed to 5.3 per cent in the second quarter of the current fiscal from 6.7 per cent a year ago.
Analysts say India needs to take more steps quickly, including speeding up approval for infrastructure projects, overhauling the tax system and reducing its swollen deficit to revive capital investment, reports the Reuters.
Prime Minister's Economic Advisory Council chairman C. Rangarajan has said FDI in retail is good for the country in the long run.
It will streamline the distribution mechanism, but it should ensure that small retailers are not affected, he added.
FDI has been permitted only in major metropolitan towns. Also nearly 30 per cent of goods should be sourced from small and medium enterprises.
The opening up of multi-brand retail to foreign chains will be beneficial for Indian retailers such as Kishore Biyani’s Future Group, Reliance, Tata’s Trent and Shoppers Stop, which can now raise long-term capital for expansion and development.
According to AC Nielsen, the penetration of organised retailing in India is very small, there are 6 organised retail stores for every 1,000 disorganised stores, there are about 100 in China to every 1,000.
The following is a chronology of how the controversy began:
On 21 September 2012, the government notified its decision to allow 51 per cent FDI in brick-and-mortar multi-brand retail. However, it also prohibited such investments in e-commerce in both multi-brand and single-brand sectors — a move that would hit Walmart and Amazon.
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On 14th September, the government allowed up to 51 per cent FDI in multi-brand retail, after years of slugfest with some of its allies and the opposition parties.
Wal-mart had entered India in 2006 in the hope of setting up a chain in the country but ended with only a cash-and-carry or wholesale venture with Bharti Enterprises. Also, Swedish furniture giant IKEA can now go ahead and set up its stores in India, as the single-brand sourcing norms have been diluted.
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On 2 December 2011, Prime Minister Manmohan Singh reached out to West Bengal Chief Minister Mamata Banerjee, who was opposing the Centre's decision to allow FDI in retail.
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On 14th November, the industry ministry circulated a draft Cabinet note for allowing foreign direct investment (FDI) in multi-brand retail.The draft note circulated for inter-ministerial consultations is in line with the recommendations of the high level committee of secretaries, headed by Cabinet Secretary Ajit Kumar Seth.
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On 3rd August, the government said it would take an early decision on opening up multi-brand retail sector for FDI. "Policy formulation is a careful calibrated exercise. Once recommendations formally reach my table, we will take early and appropriate policy decision," Commerce and Industry Minister Anand Sharma said in Rajya Sabha.
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On 18 June, a consensus has emerged in the government to permit FDI in multi-brand retailing but with stiff riders. Although all key ministries have given their nods for opening up of multi-brand retail, various limits have been suggested.
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On 14 May, the government is believed to be giving final touches to the proposal for allowing FDI in multibrand retail, in a decision to go ahead with its reform agenda. However, in order to not incite large-scale protest and opposition, it has decided to open the sector in a “calibrated manner”.
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On 23 October 2010, the government was divided over allowing nt ( FDI) in multi-brand and foodgrain retailing. While the ministry of finance is opposed to any change in the existing retail FDI policy, the agriculture and consumer affairs ministries, along with the Planning Commission, are open to the proposal mooted by the ministry of commerce and industry.
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On 8 October 2005, Agriculture and Food Minister Sharad Pawar said the decision to allow FDI in retail in rural areas could only be taken after incorporating views of all those concerned, including the Left.He said: “The government will have to take bold decisions to increase FDI in rural retail marketing”.
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On 20 July, the department of industrial policy and promotion (DIPP) prepared a Cabinet note for allowing foreign investment in retail trading ventures.
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On 24 February, under pressure from the Left on opening up to foreign competition, Commerce and Industry Minister Kamal Nath said that allowing FDI in retailing should be debated at length before a decision is taken. He said: “The nature of the retail sector is too complex for a hasty decision.... Only 2 per cent of the business is in the organised sector and of the remaining 98 per cent, 50 per cent is subsistence retailing”.
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Media reports say the National Democratic Alliance's (NDA) 2004 pre-election vision document (the BJP did not release an independent manifesto that year) had said it might open up retail for FDI.
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