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Tuesday , January 14 , 2014
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AAP won’t stomach foreign shops

New Delhi, Jan. 13: Arvind Kejriwal has reversed his predecessor’s decision to allow foreign direct investment in multi-brand retail in Delhi, becoming the first chief minister to withdraw such an approval and deepening the uncertainty enveloping economic decisions in an election year.

Chief minister Kejriwal based his decision on the need to protect jobs, seeking to strike a balance between Delhi’s trading community that stood by him in the Assembly elections and a wider audience of professionals whose concerns he tried to address by saying he was not against FDI per se.

The Delhi government’s decision narrows the metros available to foreign investors in retail. Only Bangalore and Mumbai remain open as vehement opposition from Mamata Banerjee and Jayalalithaa had already made Calcutta and Chennai out of bounds.

The Kejriwal government asked the central department of industrial policy and promotion (DIPP) to remove Delhi from the list of states that had consented to an FDI policy.

In July 2012, then chief minister Sheila Dikshit, heading a Congress government, had given consent in line with the stand adopted by most UPA-ruled states. Other states had not given consent. In the current season of copycat politics, the Aam Aadmi Party government’s decision may compel more states to follow suit in the event of a change of guard.

“The DIPP has received the letter in this regard from the Delhi government and is looking into it,” an official said.

Kejriwal said his party was not principally against FDI but would take decisions sector by sector. “We agree that FDI in retail increases consumers’ choices to a greater extent but experience the world over shows that it leads to loss of jobs. Data presented by the central government in support of FDI is not corroborated by experience in other countries,” Kejriwal said.

The chief minister added that Delhi was not yet ready for FDI. “When one weighs between better consumer choices in retail and unemployment, we feel that we need to first increase employment opportunities,” he said.

Economist Surjit Bhalla did not agree with Kejriwal. “There is no evidence that FDI leads to unemployment; in fact, research suggests just the opposite. FDI leads to increase in efficiency and higher investment means higher production and better wages,” Bhalla said.

He said there would be a few displacements but apart from that, FDI leads to improvement in the overall health of the economy.

Kejriwal said that instead of FDI, his government wanted to concentrate on creating “a conducive environment to do honest business”.

The chief minister will meet traders in the next few days. “Trade brings in wealth and generates employment, so we need to remove bottlenecks and corruption that traders face at each stage. We will need to make policy changes for it,” he said.

Although no global player has opened multi-brand stores in Delhi and such investments can be made in any city as a population-linked regulation has been scrapped, the capital is one of the largest retail markets. Consumption rates are high in Delhi, which has an urban population of nearly 10 million with an average per capita income of Rs 2 lakh a year.

“This move by the AAP government is not an encouraging one and will have a larger economic implication in terms of impacting investor sentiments,” said Saloni Nangia, an analyst with retail consultancy Technopak.

According to the FDI policy approved by the Union cabinet, the final decision of granting trade licences rests with the states. States that had supported the FDI policy include Maharashtra, Jammu and Kashmir, Haryana, Rajasthan, Uttarakhand, Andhra Pradesh and Assam.

“Most large international retailers are in a wait-and-watch mode. After the general election, a different picture may emerge; you will get to know where opportunities in FDI in retail are,” an analyst said.

The BJP has voiced its opposition to FDI in retail but its candidate for Prime Minister, Narendra Modi, has not taken an explicit stand.

So far, UK-based retailer Tesco has got the approval to open multi-brand retail stores in the country in a joint venture with the Tata group. Tesco is expected to run stores in Maharashtra and Karnataka, and its initial plans do not include Delhi, commerce ministry officials said.

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