AAP shuns retail FDI in Delhi, MNC retailers disappointed

Wednesday, 15 January 2014
While the multi-brand retail sector was readying to welcome foreign retail giants like Tesco, who had shown interest in opening stores in India despite the reservations. Another hurdle has now emerged in the guise of Aam Aadmi Party (AAP), which has taken a strong stand against FDI in multi-brand retail. The party that recently took center-stage in New Delhi has reversed the decision of allowing global chains to set up superstores in the capital.

AAP disappoints MNC retailers

The decision, an election promise of the Arvind Kejriwal-led AAP has come as a shocker not only to foreign retail biggies but also to the Congress, which allowed up to 51 percent FDI in multi-brand retail almost a year ago and was anxiously waiting for the proposals to pour in. It may be recalled that the previous Congress government-led in Delhi was among the first in the country to allow multi-national giants to open deep-discount stores.

The new, Delhi Chief Minister, Kejriwal has however clarified that this decision should not be interpreted that AAP favoured a blanket ban on FDI. “AAP is not against FDI. But whatever information is available to us, it clearly shows that while FDI in retail improves consumers’ choices but at the same time it leads to loss of jobs at a very large level,” he said.

Multi-brand retailers and industry associations and experts have expressed dismay over the decision. FICCI President Sidharth Birla, for instance, said the decision would hurt investor sentiment. “This direct negation without demonstrating a search for a viable alternative or via media would hamper investment sentiment for the state (of Delhi),” Birla said in a statement. He said both large multi brand retail stores and small stores can co-exist peacefully.

Kejriwal has written to the Department of Industrial Policy and Promotion (DIPP) to not allow FDI funded stores in the state. This is the first time an Indian state has decided to withdraw support for FDI funded retail stores. Even Bharatiya Janata Party (BJP) ruled states are against FDI in multi brand retail. So, after Delhi, the new BJP government in Rajasthan may not allow global retailers leaving a very limited apace for retailers such as Tesco, Walmart or Carrefour to explore one of the world's fastest growing and largest retail markets. As per recent media reports story, more than a dozen states, including UP, Bihar and West Bengal have ruled out FDI in the multi-brand retail segment already. Outside north India, the new political contours leave only three large and prosperous states — Maharashtra, Karnataka and Andhra Pradesh ruled by the Congress party, as potential avenues for foreign retailers.

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