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New Delhi:
Ending months of perceived policy paralysis, the UPA government
Friday finally bit the bullet and pushed ahead with the boldest
reforms yet by allowing 51 percent foreign investment in
multi-brand retail - and opening the aviation sector - triggering
expected outrage among some of its allies as well as the
opposition.
The government clarified that states which did not favour 51
percent FDI in multi-brand retail - which opens up India's
estimated $450 billion retail market to foreign supermarkets like
Walmart and Carrefour - were free to not implement the policy.
This effectively means that states ruled by Congress governments
can implement the decision while states ruled by non-Congress
parties or the central government's allies will not have to
implement it
The move comes at a time when the government's reputation has been
battered by a host of alleged scams and Prime Minister Manmohan
Singh's reputation as a reformer has taken a dent, with a leading
US daily portraying him as "a tragic figure" and Time magazine
describing him as "an underachiever".
Manmohan Singh was the prime mover behind this audacious but
politically fraught decision.
Informed sources said he reportedly pushed for the decision at the
meeting of the cabinet committee on economic affairs (CCEA),
saying the UPA government needs to "bite the bullet".
"We have to bite the bullet. If we have to go down, let us go down
fighting," the prime minister was quoted by the sources as having
said there.
The government also approved FDI in aviation and gave its nod for
disinvestment in four PSUs, part of a package of reformist
measures, along with the steep hike in diesel prices announced
Thursday, which are widely seen as aimed at shoring up the
faltering economy and the international standing of India that has
taken a severe beating in recent months.
Soon after the decisions were made known, the prime minister
appealed to the people to support the government's steps that were
"taken in national interest."
"I urge all segments of public opinion to support the steps we
have taken in national interest," the PMO's Twitter handle quoted
him as saying. "I believe that these steps will help strengthen
our growth process and generate employment in these difficult
times."
The decision could potentially be a game-changer for India's
retail market, which is dominated by neighbourhood stores.
'Opp cries foul, Industry backs decision'
While industry bodies welcomed the
move, ally Trinamool Congress joined the angry chorus of the
Bharatiya Janata Party (BJP) and the Left to denounce the move,
which the government insisted would not hurt India's national
interests.
BJP and Communist leaders called the decision a "betrayal" of the
people's interests.
"This is a complete betrayal, also of parliament," BJP MP Balbir
Punj said. Communist Party of India's D. Raja said a
corruption-tainted regime was trying to salvage its image.
West Bengal Chief Minister and Trinamool Congress Mamata Banerjee
was furious and said she would not stand for it.
According to Trinamool MP Kunal Ghosh, the party's parliamentary
board will meet Tuesday to take a final decision, which could even
lead to withdrawal of support from the government. "All options
are open. We are ready to take any kind of strong decision," he
said.
The BJP, whose opposition to the coal block allocations paralyzed
parliament's monsoon session, vowed to unleash nationwide protests
against the FDI unveiling.
As criticism mounted, Commerce Minister Anand Sharma defended the
sweeping policy changes, viewed as a major step to spur economic
reforms.
"It is not a sudden decision," Sharma told the media, explaining
the decisions taken Friday.
The cabinet also decided that overseas retailers setting up a
single brand store in India must source at least 30 percent of
their goods from Indian companies, preferably from micro, small
and medium enterprises (MSMEs). Earlier it was mandatory for the
overseas firms to source 30 percent of the goods from MSMEs.
The minister said the decision was first taken last November but
subsequently held back following opposition mainly from the Left,
BJP and the Trinamool.
But it was "never rolled back", Sharma clarified.
He said since then the government had held intense discussions
with various stakeholders with a view to creating broad consensus.
He said among those who were spoken to were farmers associations,
civil society groups, regional chambers of commerce and industry
as well as state governments.
"I had personally written to every chief minister of the country,
spoken to almost all of them. There are states which reacted to
the proposal very well, some expressed opposition. The response
has been a mixed one."
According to the government, the move comes with some conditions
for the investors.
Sharma said multi-brand FDI was expected to generate a large
number of jobs in rural India besides giving remunerative prices
to farmers for their products.
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