Modi’s U- turn on FDI

The Asian Age - - Edit -

The gov­ern­ment de­cided last Wed­nes­day to per­mit 100 per cent for­eign di­rect in­vest­ment in sin­gle- brand re­tail on the au­to­matic route, up­grad­ing the ear­lier pro­vi­sion of per­mit­ting a much smaller per­cent­age FDI in trade through per­mis­sion in each case. This will help for­eign brands such as the fa­mous Swedish home fur­nish­ings multi­na­tional gi­ant Ikea. The new move could be the thin end of the wedge for a broader FDI par­tic­i­pa­tion in multi- brand re­tail.

As Gu­jarat chief min­is­ter in 2012, Naren­dra Modi had been in the fore­front of op­pos­ing the Man­mo­han Singh gov­ern­ment’s move to give clear­ance to FDI in multi- brand re­tail.

The BJP’s plea was that fam­ily- run mom and pop stores, a part of its so­cial base, will be af­fected. Crit­i­cis­ing the move, Mr Modi had taunt­ingly asked if the gov­ern­ment was try­ing to per­mit “Ital­ian” cap­i­tal in trade — a dig at Congress leader So­nia Gandhi’s coun­try of ori­gin.

The Left par­ties were the only other key Op­po­si­tion bloc to be on the same side as the BJP.

The Modi Cabi­net has dropped the 30 per cent manda­tory lo­cal sourc­ing that the Man­mo­han regime had pro­posed for FDI in trade en­trants. This could es­pe­cially hit in­for­mal and small and medium sec­tor man­u­fac­tur­ing, which is yet to re­cover from the shock of de­mon­eti­sa­tion.

RSS af­fil­i­ate Swadeshi Ja­gran Manch has op­posed the gov­ern­ment’s de­ci­sion, es­pe­cially the drop­ping of the manda­tory lo­cal sourc­ing pro­vi­sion, though it is doubt­ful it can take its op­po­si­tion far.

If fire walled to pro­tect do­mes­tic man­u­fac­tur­ing, FDI in re­tail would not have been un­help­ful. But it has come at a time when in­ter­na­tional FDI flows have de­clined sharply.

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