The Bharatiya Janata Party manifesto decision to oppose foreign direct investment in supermarkets has made the sector more wary. The United Progressive Alliance’ policy to allow 51 per cent FDI in multi-brand retail in September 2012 could be reversed if the BJP comes to power at the Centre.
“The policy can be changed without any problem by the next government,” said legal expert Subhash Kashyap.
International supermarket chains like Walmart and Carrefour had already stopped hiring for their Indian businesses and were just about spending on renovation and repair to keep existing facilities in shape, sources said.
For the UK-based Tesco, which has a deal with the Tatas to open supermarkets in Karnataka and Maharashtra, a lawyer said provisions under international agreements would protect the company. Tesco said it would not comment on the matter at this point. French retailer Carrefour, believed to be in talks with Indian chains like Bharti, also refused to comment. Walmart, the world’s largest retailer that recently broke up with Bharti, did not reply to queries.
Executives of retail companies pointed out there was no need to come to any conclusion right now, with results for the Lok Sabha elections due on May 16. A retailer who did not want to be quoted said, “Why should we all assume that the BJP is coming to power? It is too hypothetical. Let us wait and see.”
A bureaucrat who did not want to be named, said, “If a BJP-led government junks retail FDI, it will be a major policy reversal affecting the international financial community and that will be the first turnaround of its kind.”
Arvind Singhal, chairman of Technopak, said, “The manifesto is only to attract votes. It should not be treated as a real statement of intent.” However, the ruling party would like to stick to its manifesto for at least a year or two before going in for a review, said a source who did not wish to be named.
A senior executive with an European retail chain said the present FDI policy was untenable because of conditions like sourcing 30 per cent from small and medium units in India.
Lalit Bhasin, regional president of the Indo-American Chamber of Commerce, called the BJP’s stand on FDI in supermarkets a retrograde step. Sidharth Birla, president of the Federation of Indian Chambers of Commerce and Industry, said, “We hold out hope for a possible review.” Rana Kapoor, president of the Associated Chambers of Commerce and Industry of India, said: “We would continue to impress upon the BJP to reconsider its stand on FDI in multi-brand retail as the move will act as a multiplier effect on India’s economy without impacting in any way the neighbourhood kirana stores.”
The Confederation of Indian Industry termed the manifesto industry friendly but did not comment on the party’s opposition to FDI in multi-brand retail.