IndiaRetailBiz

Its an interesting tug of war between what it desires and what it can realistically do! Yeas, we are talking about allowing FDI in retail. Earlier, the government was desirous of allowing FDI in retail, which was shelved after strong protests from interested lobbies.

Earlier, the government was keen to allow FDI in retail for specialised categories like sports goods, stationery, and durables, which in its opinion would not have impact on India’s mom n pop stores. This, however, had also to be shelved until the report on big retail’s impact on small traders was received by the government from ICRIER. Like most reports, the ICRIER report, though said to be ready for some time, is awaiting submission, according to a media report, for want of release of a small payment incurred by the agency on additional services. The obvious inference is that the government does not want to avoid dealing with this political hot potato and postpone the matter until formation of the new government.

The subject has again been revised, however, as the government in its latest Economic Survey (2007-08) published on Thursday has talked of raising the limits or allowing FDI in certain areas of retail. Currently, while no FDI is permitted in front-end retail of multi-brand retail chains like Wal-Mart, Carrefour, and Tesco, up to 51% FDI is permitted in single-brand retail like Nike and Starbucks.

According to new wish list, the government, among other sectors like banking and insurance, is in favour of allowing 100% FDI in foreign branded, specialised retail chains like luxury brands, consumer durables and semi durable.

This, however, may turnout to be a mere pipe dream only as the Left, which supports the Congress-led UPA government at the Center from outside, will never agree to the opening of additional limits/ sectors for foreign direct investment, unless of course the UPA is prepared to sacrifice its government and hold elections later this year i.e. before the scheduled date in May, 2009.

The news has, however, helped retail stocks of the companies like Pantaloon, Shoppers’ Stop, Koutons, and Provogue register gains on the bourses on Thursday.