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Lack of foreign investment in multibrand retail underscores failures of political will.

Updated: April 11, 2014 12:59 am

On Tuesday, US retail major Walmart announced plans to open 50 wholesale stores in India over the next four to five years and indicated its resolve to initiate business-to-business e-commerce. The fact that, despite all the ups and downs, Walmart is still keen to do business in India is heartening. But given that, as of now, it does not have any plans to start multibrand retail operations is indicative of the grave political failures across the board.

Prime Minister Manmohan Singh staked the survival of his government by allowing 51 per cent FDI in multibrand retail in September 2012. The Congress even held a rally in Delhi to drum up support for the policy and paid the price for pushing it through when Mamata Banerjee walked out of the UPA. But the rules governing the policy were so restrictive that, in spite of multiple amendments, only one foreign company, UK-based Tesco, has entered the segment by tying up with Tata Trent.

Across the fence, the BJP, in its manifesto, has promised to scrap the policy altogether if it comes to power — even though in a note for a group of ministers in 2002, the NDA’s commerce minister had proposed 100 per cent FDI in retail, while the NDA’s manifesto in 2004 promised 26 per cent FDI in the sector. Further, in February, Narendra Modi himself had urged traders to step up to the challenge posed by large, modern shops and e-commerce — this was widely interpreted as a softening of the BJP’s stand on FDI in multibrand retail.

But Walmart’s sustained interest and expansion plans are a sign of hope and, if implemented, they will greatly benefit kirana shops and SMEs. The kicking off of wholesale operations would also buy the next government some time, during which small local traders and suppliers can get used to doing business with a large multinational company and realise the mutually beneficial relationship that is waiting to be fully tapped.

But until large foreign players are allowed into the front-end of the retail market, supply chains will not improve and farmers won’t benefit, big Indian retailers will not become more efficient and consumers won’t gain. This is the challenge before the next government.

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