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The election manifesto of the Bharatiya Janata Party (BJP) has categorically opposed foreign direct investment (FDI) in multi-brand retail to "protect the interests of small and medium traders", but the new government is unlikely to reverse the policy. Narendra Modi, who will take charge as the Prime Minister in a few days, recently said in an interview that his government would not roll back a policy.
The retail policy could be partially tweaked, though. According to sources, there may be a move to lower the FDI cap to 49% from the current 51%in multibrand retail over a period of time, perhaps to make the entry of international players tougher. Another account suggests that the sourcing norms in retail, considered a hurdle for investors, may be eased gradually.
Also, indications are that FDI in e-commerce may be a reality soon. In fact, earlier this year, speaking at a small and medium trader's convention in Delhi, Modi had supported FDI in e-commerce. Last week, Department of Industrial Policy & Promotion (DIPP) had a meeting with stakeholders as well to discuss FDI in e-commerce. Currently, FDI is not permitted in e-commerce, but there's no rule blocking foreign investment in online companies following the marketplace model.
"The interests of the new government can be simply served by not taking any further steps on the policy. I don't think that this will be the immediate priority area for the new government. But at some point, they will revise the policy without scrapping it altogether," said Arvind Singhal, Chairman & Managing Director, Technopak, India.
American retail chain Walmart, which operates 20 cash and carry stores in India, has said it would "engage and work" with the new government. UK's Tesco is the only foreign multibrand player to have made an application ever since FDI was allowed in the sector in September 2012. Tesco has proposed to invest in Maharashtra and Karnataka, two Congress-ruled states backing FDI in retail.
The BJP manifesto also promises to modernise small and medium traders. Stronger credit system, establishing self help groups under National Rural Internet and Technology Mission, simplification of the licensing system, equipping small traders and small vendors with the latest techniques and methods are other key points for the retail sector.
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