Political Battle Returns Over FDI in India

The issue came center stage again after the government agreed to the demand to allow a debate with voting in both houses of Parliament.

NEW DELHI — Foreign direct investment in India retailing is a political football once again.

Although many retailers — both global and those in India — have already celebrated the government’s decision in September to allow FDI in multibrand retail, the issue came center stage again on Thursday after the government gave in and agreed to the demand to allow a debate with voting in both the upper and the lower house of Parliament next week.

“We are not worried because we feel we have enough support on the matter,” a senior politician from the United Progressive Alliance told WWD, while requesting anonymity.

Kamal Nath, the minister for parliamentary affairs, has also been projecting a strong and a winning approach. “I am confident of both houses. But I will be urging parties to look at the politics of it and to vote with the government. Because it is clearly a political move, nothing to do with FDI in retail,” he said.

The lower house, the Lok Sabha, will vote on the matter on Tuesday and Wednesday, and the upper house, the Rajya Sabha, on Thursday and Friday.

The issue is a sensitive one and has cast a long shadow over the government, which is being seen as open, progressive and decisive on the one hand and not concerned enough about the thousands of small retailers on the other. The opposition parties have complained long and loud this week that although they were meant to be “stakeholders” in the process of allowing 51 percent FDI in multibrand retail, the government unveiled the decision without properly consulting other parties.

Bharatiya Janata Party spokesperson Shahnawaz Hussain explained: “The government has not kept its assurance to Parliament that the decision on FDI will be taken only after discussing the issue with all stakeholders. The sense of the House on the issue can be known only through voting. So, the government should give up its adamant attitude.”

The fear about big retailers such as Wal-Mart Stores Inc. coming into the country is that the mom-and-pop stores will go out of business and several political parties including the BJP and Communist Party of India (Marxist) are strongly against it.

“We have opposed the decision and we will oppose it in Parliament,” said Sitaram Yechury, leader of CPI(M). “We will ask all the political parties to fight against it.”

The process to allow the FDI in retail is complex, with the need to amend regulations under the Foreign Exchange Management Act, or FEMA, which requires approval of both Houses of Parliament. This, is in effect, like a second vote on the matter. On Friday the government tabled this amendment in the lower house of Parliament, seeking to provide for 51 percent foreign investment in multibrand retail, 100 percent FDI in single-brand retail and investment by foreign airlines in domestic carriers.

A decision has to be taken on these within 30 days.