New Delhi, July 14: The likes of Wal-Mart are likely to be given the message that India will open its doors to foreign direct investment (FDI) in retail. The hints, to be dropped during Prime Minister Manmohan Singh’s trip to the US this month, may not be open since the government does not want to set off another row with the Left, which opposes the move. The signals will go out in private meetings with US business leaders, top officials said.
Officials in the finance and commerce ministries worked feverishly to get the Cabinet’s seal on plans to allow 26-49 per cent FDI in retail before Singh left for the US. Though the clearance has been delayed, officials said “it remained on the agenda”. “The form, shape and timing will be decided by the Prime Minister in consultation with other allies in the ruling UPA coalition.”
US and European embassies, which have been lobbying the government on behalf of their retail chains, see FDI in retail as a key reform measure. UK’s Tesco, France’s Carrefour and Germany’s Metro are keen to get in.
The Left parties, fearing the move will drive millions of small shop-owners and workers out of business, are stalling it. Retail trade in India accounts for around 11 per cent of GDP. It employs over 25 million people, or 8 per cent of its total workforce. Analysts contend this figure could change dramatically if MNCs came in and increased efficiency levels in this sector.
Officials said the Prime Minister could also tell US business leaders that liberalisation of the economy remains on course, despite resistance from the Left to divestment in PSUs and foreign investment in key sectors.
Examples of the economic cooperation treaty with Singapore, liberalisation of air services agreements, rise in telecom FDI will be showcased as big reform leaps. The end to the Dabhol row will figure on the list too.
The hard-sell will also revolve around introduction of product patents and the cut in peak duty to Asean levels. Officials say these were two big initiatives US firms wanted.
During his US visit, Singh is expected to announce a forum of CEOs, many of whom met him today. Ratan Tata, Mukesh Ambani, Y. C. Deveshwar, Nandan Nilekani, Kiran Mazumdar-Shaw, Deepak Parekh, Analjit Singh and Ashok Ganguly will be part of the PM’s retinue.