By Ian Bhullar
Aug. 1 – As part of the slow move toward introducing foreign direct investment in the Indian multi-brand retail sector, reports released this week suggest a push from U.S. multi-brand giants such as Walmart to liberalize India’s retail environment.
According to lobbying disclosure reports filed with the U.S. House of Representatives and U.S. Senate in the past week, Walmart has and continues to earmark funds specifically for lobbying on FDI reforms in retail. Lobbying is directed at U.S. lawmakers, who are in turn expected to push for policy change in India.
Walmart spent nearly US$1.5 million on lobbying in the last quarter to June 30, 2012, although it is not clear how much of this was specifically spent on lobbying relating to India. Nevertheless, it is clear that the supermarket chain is keen to gain access to India’s vast market.
On the other side of the coin, the Confederation of All India Traders (CAIT) has announced that its members will observe a “Quit FDI” protest day on August 9, in opposition to FDI in retail. The Confederation claims a membership of 50 million.
“Foreign investments by MNCs will hijack the country’s retail trade which would lead to closure of majority of small businesses and job losses for lakhs of people engaged in the sector,” CAIT secretary general Praveen Khandelwal has said.
The same cause is supported by some parties in opposition to the ruling UPA coalition, such as Mamata Banerjee’s Trinamool Congress. Even decision-makers supportive of UPA have voiced concern. A group of politicians including members of the Samajwadi Party, a UPA supporter, has warned the Prime Minister that introduction of multi-brand retail could hurt 40 million people employed in retail.
The loss of India’s traditional mom-and-pop store culture is often cited as a major downside to introducing multi-brand retail to India.
Plans in government for allowing multi-brand retail remain unclear, although Pranab Mukherjee, recently instated as President of India after leaving the office of Finance Minister, indicated in June that there were concrete plans for policy change were underway.
“We have further liberalised FDI in single-brand retail, and a consensus for operationalising the decision taken to open FDI in multi-brand retail trading is being pursued,” Mukherjee said.
He also spoke at the beginning of July about the potential for increased FDI in the food sector to improve food supply and ease price inflation.
The Congress-led government plans to push legislation through by leveraging the power of Congress-dominated state governments such as Assam, Haryana, Maharashtra and Delhi, and assuring opposing states that they will not be forced to introduce multi-brand retail.
However, with civil society and the political realm divided on this issue, such pronouncements are only small components of a much lengthier debate.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
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