Four organised retailers fell by 1.24% to 4.97% at 14:04 IST on BSE on reports the government has not decided its stance to allow foreign direct investment in the retail sector.
Future Retail (down 4.97%), Store One Retail India (down 4.87%), Shopper's Stop (down 1.44%) and Trent (down 1.24%), edged lower.
The S&P BSE Sensex was down 239.21 points, or 0.91% at 26,032.64.
The new government has not decided its stance on a policy in place to allow foreign direct investment in supermarkets, trade minister Nirmala Sitharaman reportedly told lawmakers in a written reply in Parliament on Friday, 25 July 2014.
The Bharatiya Janata Party (BJP)-led government has opposed the policy put in place by its predecessor to allow foreign supermarkets to operate in India. But the new administration has not been clear whether it will revoke the policy.
In September 2012, the previous ruling government had allowed 51% FDI in the multi-brand retail sector, but the sector has failed to see any investment due to stringent rules set by the government.
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The government on 6 June 2013 clarified that the foreign supermarkets entering India must invest in new supply chain infrastructure, such as warehouses and cold-storages, rather than buying existing assets. The government had stipulated that at least 50% of the investment made by the foreign company must be in supply chain infrastructure.
Before the general elections earlier this year, the BJP had said it will not allow foreign direct investment (FDI) in multi-brand retail. The manifesto, however, said the BJP will allow FDI in all wealth-and job-creating sectors.
Barring the multi-brand retail sector, FDI will be allowed in sectors wherever needed for job and asset creation, infrastructure and acquisition of niche technology and specialized expertise. BJP said it is committed to protecting the interest of small and medium retailers, SMEs and those employed by them. The FIPBs (Foreign Investment Promotion Board) functioning shall be made more efficient and investorfriendly, the BJP said.
This will mean overturning of the current terms, where state governments have the right to decide on the matter of allowing FDI in multi-brand retail sector.
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