India’s plans to ease rules on foreign investment in retail have today (20 September) come into effect, even as protests against the policy took place throughout the country.
In a statement, India’s Department of Industrial Policy & Promotion issued a notification implementing the reform, which will allow overseas investors to own 51% of multi-brand retail outlets.
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“FDI in multi brand retail trading, in all products, will be permitted,” the DIPP said.
The notification was a formal announcement that the plans, announced by India’s ruling coalition on Friday, would be implemented.
Political opposition had stymied a previous attempt to relax the rules on foreign investment in December and last week’s annoucement has also been met with criticism. Opponents argue small domestic traders would be forced out of business.
On Tuesday, the Trinamool Congress Party, a member of India’s ruling coaltition, said it would resign from the government in protest. The party’s chief minister, Mamata Banerjee, used Facebook to hit out at today’s notification the reforms would be implemented.
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By GlobalData“I have just come to know through media that Central Government has notified FDI in retail today. Is it ethical, moral and democratic for a minority government to issue Government order forcefully and hurriedly, when massive protest against it is taking place across the country?,” Banerjee wrote.
“This action by a minority government questions its credibility. It also defies democratic tradition in the context of the assurance given in a statement by the former Finance Minister on 7/12/2011 in Lok Sabha [the lower house of India’s Parliament] to go in for consensus among all stake holders before taking a decision.
“It is not understandable as to what has prompted the present minority government to take a hurried decision on such an important issue which touches the livelihood of millions of common people.”
The reforms do carry conditions. Individual states can block the opening of multi-brand outlets. Foreign retailers cannot start e-commerce operations. An investor must spend at least US$100m, half of which must be spent on back-end infrastructure.
Stores can only be set up in cities of at least one million people, although states in favour of reform without cities of that size can open multi-brand outlets in locations of their choice
Retailers have to procure 30% of their products from Indian “small industries”, the notification said, although operators will have five years to meet the requirement.
A nationwide strike to protest against the reforms was reportedly mixed. Shops and schools were closed in some states and some train services were affected. In other states, the strike had little impact.
