Jaitley on FDI in retail: Governance involves responsibility and continuity

Finance Minister Arun Jaitley on Saturday suggested the National Democratic Alliance (NDA) government would continue with the United Progressive Alliance (UPA) regime’s policy of allowing foreign direct investment (FDI) in multi-brand retail, just as it had pursued India-US nuclear cooperation when in power, despite opposing it in 2008.

In a pronounced signal from the government on FDI in multi-brand retail, Jaitley said the Bharatiya Janata Party (BJP) opposed FDI in this sector but governance involved elements of “responsibility” and “continuity”. Therefore, the notification on the subject issued by the UPA government continued, he said at the BJP national headquarters here.

“We (the BJP) had a view on the Indo-US nuclear deal but once you are in the government and a previous government has implemented the deal, you work within the limitations of the government…therefore, governance brings a kind of responsibility where continuity has to be carried,” the finance minister said, albeit reiterating his party’s views on the subject were unchanged.

The BJP had opposed the India-US nuclear deal pushed by the Manmohan Singh-headed UPA government in 2008. But Prime Minister Narendra Modi had vigorously sought to consolidate the gains made through that agreement during his visit to the US in September 2014. This was also the case when Modi hosted US President Barack Obama in India in January. The PM has also expedited movement on similar agreements with France and Canada.

The finance minister’s comment on FDI in multi-brand retail is more nuanced than his statement on the issue on Friday. When asked whether investors should look at the BJP’s stand or that of the government, he had said: “Investors are smarter than you or me.” Last week, the Department of Industrial Policy and Promotion  had issued a policy document, retaining the UPA government’s decision to allow 51 per cent FDI in multi-brand retail.

 

On the issue of FDI in multi-brand retail, the government has spoken in multiple voices. On Thursday, Commerce Minister Nirmala Sitharaman told a news channel the government might consider a repeal of the UPA decision.

"I will go back to the Cabinet and say 'should we delete one document'...I am not going to entertain any proposal in multi-brand retail," she had said.

Jaitley identified subdued domestic investment and the agrarian situation as two of the three challenges the government faced as it stepped into its second year, the third being global economic conditions. "Domestic investment has to pick up," Jaitley said.

Even as gross domestic product (GDP) growth was officially pegged at 7.4 per cent in 2014-15, up from 6.9 per cent in the previous year, industrial growth isn't picking up due to subdued investment. The Index of Industrial Production (IIP) grew 2.8 per cent in 2014-15, against contraction of 0.1 per cent in 2013-14. The slump in the industrial sector can be gauged from the fact that the expansion in 2014-15 was the same as in 2012-13 and 0.1 per cent less than in 2011-12, years which had seen a major slowdown in economic growth.

Gross fixed capital formation, a proxy for investment, increased only 1.64 per cent in the quarter ended December 2014, compared with 2.79 per cent in the previous quarter 7.65 per cent in the quarter ended June 2014.

Jaitley said the "restlessness" of the people for the economy to grow more than even 7.5 per cent should put pressure on the Congress to shed its anti-growth and anti-development agenda.

He added in the past year, inflation had been under control to a great extent. "The overall inflation situation has been much better than in the past decade," he said. This he attributed to a decline in international oil and commodity prices and the government's efforts.

Jaitley cited increased transparency and an end to crony capitalism and lobbying as some of the highlights of the NDA government. He termed the Congress model of welfare-ism “fundamentally defective”, as it didn't focus on an increase in productivity, but only on redistribution of resources. He said it was “myopic” to think the funds on social welfare schemes, education and health came from a single source, the Centre. States, he said, would pitch in after financial devolution.

JAITLEYSPEAK

• Agrarian situation a challenge for next year
• Domestic investment should pick up
• Inflation lowest in a decade
• An end to lobbying, crony capitalism
• Irresponsible comments by ministers, MPs a problem
• No talent deficit in govt
• ‘Achhe din’ are here with no corruption, better decision making, positive economy
• Govt wants insurance net to cover 50% Indians, against current 20%
• Synergy between party and govt
• Restored credibility of the PMO
• Last word belongs to PM, which is how it should be
• Constant dialogue with Mazdoor Sangh, Swadeshi Jagaran Manch

PLANS TO MARK A YEAR OF THE NDA GOVT

• Slogans ‘Modi sarkar-vikas lagatar’ and ‘Saal ek, shuruaat anek’
• Jan kalyan parva during May 26-31
• 500 exhibitions to showcase the Jan Dhan Yojana, pension and insurance schemes
• 340 I&B ministry vans to screen short films on govt’s achievements
• 200 big rallies, 5,000 public meetings and 200 press conferences
• PM Modi to address a rally on Monday at Nagla Chandrabhan in Mathura
• Central ministers, CMs, MPs, MLAs, etc, to spread the message of central govt schemes
• Govt to launch 24x7 kisan channel on May 26