India may by this year-end decide on allowing foreign direct investment in multi-brand retail, according to Commerce Secretary Rahul Khullar.
“There are a couple of things on which there are still some political sensitivities…my sense at this point of time is that by the end of the year you should get a decision,” the top government official said in an interview with Business Standard.
Khullar identified some issues as “last-mile obstacles” on which political decisions were awaited in response to the recommendations made by the Committee of Secretaries, of which he is a member. These include calls on whether to insist on domestic sourcing by foreign investors, and if so, to what extent; whether there will be a threshold level for foreign investment and ownership; and if foreign investors will in the beginning be limited to certain cities or markets.
He also said the government would have to work out on bringing state governments on board. “Retail is not a big political issue in many southern states because the private sector has been retailing there for years,” said Khullar, pointing to the longstanding presence of chains like Spencer’s, FoodWorld and Nilgiri’s in the southern cities of Bangalore and Chennai.
These factors would weigh on the process, but that should “not be able to prevent or forestall” the central government from taking a decision. “It’s not as difficult or as insuperable a problem as it seems,” he said.
The commerce secretary explained that the recently announced Rs 900-crore package of incentives for exporters was a case of advance action taken to help some lagging sectors ride out the expected storm over the next six months. He pointed out that monthly exports have been sliding steadily since April, when it was around $29 billion, and “if anything, the second half of the year is going to be terrible”.
The official voiced frustration at the state of affairs in the United States and the European Union, two of India’s major export markets. “The US recovery is totally fragile. I don’t know how politics is going to work itself out there because there doesn’t seem to be any glimmer of hope that they are going to turn the corner.”
Khullar said the sovereign debt crises in the EU were creating huge difficulties. “So far we’ve not seen sufficient signs of political sagacity to take the problem head on. What is a solvency problem has been treated for close to a year as a liquidity problem,” he said.
The commerce secretary is in this city in connection with India’s participation as a Strategic International Partner country this year in the Canadian Manufacturing Technology Show, which runs October 17 to 20. EEPC India is hosting the India Show at the expo. Over 150 engineering exporters – most of them from the small and medium sectors – are displaying their products at the show.
