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10 years ago,NDA had pitched for 100% FDI in retail sector

Both Mamata and Karuna,who are now strongest opponents of the move,were part of NDA then.

Written by Swaraj Thapa | New Delhi |
November 30, 2011 2:04:59 am

For all its current vociferous opposition to 51 per cent foreign direct investment in multi-brand retail,it was the BJP-led National Democratic Alliance (NDA) that had first proposed the full opening up of the retail trade sector nearly a decade ago in May 2002.

Both Mamata Banerjee’s Trinamool Congress and M Karunanidhi’s DMK,which are now the strongest opponents of the move within the UPA,were part of the NDA then.

In a note for a group of ministers on FDI chaired by the then finance minister Yashwant Sinha,the ministry of commerce and industry under DMK’s Murasoli Maran recommended permitting 100 per cent FDI in retail trade,subject to a minimum capitalisation of $10 million.

When contacted on Tuesday,Sinha said he did not remember the issue being discussed. “Anyway,a lot has changed between 2002 and now. Its like BC and AD. Moreover,like individuals,parties also grow looking at national and international developments,” he told The Indian Express.

A study of the 2002 note reveals that the rationale for allowing FDI — and the apprehensions about the move — have not changed in the last 10 years. Maran argued that the unfavourable mix between organised and unorganised retail trade outlets was slowing competition and lowering productivity. In India,organised retail was estimated to be just 2 per cent of the industry then,compared with 85 per cent in the US,35 per cent in Brazil,and 10 per cent in China. Quoting a McKinsey study,the note said reforms in retail could create 8 million jobs,improve productivity 2.5 times and increase annual output by 12 per cent.

Senior BJP leader and former finance minister Jaswant Singh was among those who backed opening up the sector. Several members of the AB Vajpayee cabinet whom The Indian Express spoke to recalled the GoM had taken up the subject,even though they contended that most BJP leaders had opposed FDI in retail even then.

“That was the conventional position even then and now,” a senior leader said.

Jaswant Singh had,in interviews,said that opening the retail sector was “part of the agenda and we (NDA) are committed to it. It’s FDI and not a question of handing over retail trade. Plenty of money is waiting to come,” he had said. Brajesh Mishra,then national security adviser and principal secretary to Vajpayee,shared his views,according to a party functionary. After Sinha gave up charge as finance minister on June 30,2002,Singh chaired the GoM. The other members of the GoM were Ramvilas Paswan,Suresh Prabhu,Maran and Vasundhara Raje.

The May 2002 note pointed out that higher productivity would lower prices. This,it said,would stimulate demand and consumer spending,since consumer demand from middle- and low-income groups had a very high price elasticity. “An 8-19 per cent reduction across the board can trigger increased demand for consumer goods,” the note said.

There were apprehensions then too about unfair competition and large-scale exit of domestic retailers and kirana stores. So too were concerns that global retailers would not source products from domestic small scale industry. But then,the note had cited the flourishing businesses of Haldiram’s,Nathus and Bikanerwala despite the entry of McDonald’s,Pizza Hut and KFC. In any case,it estimated FDI in retail to at best penetrate metros and cities with a population of one million and above.

BJP sources said that the views of Jaswant Singh — who was at that point close to both Vajpayee and deputy prime minister L K Advani — prevailed while drafting the NDA’s election manifesto for 2004. The NDA’s agenda for governance stated that it favoured opening retail to FDI up to 26 per cent.

In 2009,though,the BJP took a diametrically opposite stand. It asserted unambiguously that it would oppose any move to allow FDI in retail. This happened after Murli Manohar Joshi was made chairperson of the party’s manifesto drafting committee. The party’s vision document for 2009,drafted by the current Leader of Opposition in Rajya Sabha Arun Jaitley,contained no reference to the issue.

“It’s a reality. We have not denied it. But in 2009,we changed the position. In 2004,the NDA may have seen some merit… We are not against the concept of FDI,but not in retail. There may have been some rationale for it in 2004,” Jaitley told reporters today.

Leader of Opposition in Lok Sabha Sushma Swaraj asserted that the party’s stand could change with time. “There is no bar against wisdom…,” she said.

Both Swaraj and Jaitley sought to make a fine distinction between the NDA’s support for FDI in retail a decade ago and the BJP’s current opposition.

“In the 2004 elections there was no BJP manifesto but a vision document. In that also the BJP promised FDI in structured retail with a caveat that there will be no FDI in retail. However,the NDA manifesto (of 2004) promised FDI in retail,” Jaitley said.

He added that from 1980 onwards,no BJP manifesto had ever supported FDI in retail. “When we were in power (1998-2004) there was international pressure to allow it and some committees were formed to look into it but it was never implemented,” Jaitley said.

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