January 31, 2014

New Rajasthan Govt cancels Congress approval for FDI in retail

After Delhi, the Rajasthan Government too has cancelled the approval given by the previous Government for foreign direct investment (FDI) in multi-brand retail.
New Delhi: The new Rajasthan Government of the BJP has cancelled the approval given by the previous Congress Government for foreign direct investment (FDI) in multi-brand retail, becoming the second State to do so after Delhi, where the new Aam Aadmi Party is ruling now. The FDI permission was given by previous Congress Governments in both the states before the recent Assembly elections.

The Rajasthan government, headed by Vasundhara Raje Scindia, has written to Union Commerce Minister Commerce Minister Anand Sharma that it will not allow Foreign Direct Investment in retail, allowing super-chains like Wal-Mart to set up shop and sell directly to Indian consumers. The BJP is, in principle, opposed to permitting FDI in multi-brand retail as, the party argues, the retail FDI will deprive the small traders of their livelihood.

The BJP had routed the Congress government headed by Ashok Gehlot in the recent Assembly elections.

Arvind Kejriwal, the Delhi Chief Minister, has also told the Centre that it cannot allow foreign supermarkets although it was not opposed to foreign investment.

The decision has upset the UPA government's plans to bring in foreign investment. An unhappy Anand Sharma remarked that states which had given their approval to the FDI could not just cancel it.

"Once made, the choice could not be altered. It is a clearly settled matter that FDI policy falls within the domain of the Central government. To say that a new government has the authority to withdraw its support to the FDI policy is bad in law. The FDI policy in the sector has been discussed, debated and voted upon in both Houses of Parliament and has reached a finality," the minister told the media.

The industry also strongly reacted to the decision of the two states.

About 12 states had given their nod to the new policy of allowing international multi-brand retail chains. However, Andhra Pradesh, Haryana, Maharashtra and Karnataka are the only states fully supporting the policy.

The Central government permitted 51% FDI in multi-brand retail trading in September 2012 and left its implementation to the states.

A year ago, the Centre's economic reform had reduced the government to a minority when West Bengal Chief Minister Mamata Banerjee withdrew her Trinamool Congress from the coalition over the issue.

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