Govt can end 'policy paralysis' with more reforms: experts

The decision to ease foreign investment norms for the retail sector will not only generate fresh funds for this high-growth business, it could also help the government quash the notion of 'policy paralysis' in its economic reform agenda, experts have said.

The industry has been seeking liberalisation of foreign investment norms for the retail sector for many years. The matter has also been part of the government's overall economic reform agenda, but has been pending so far due to various political considerations.

Last week, the government decided to allow 51% FDI (Foreign Direct Investment) in the multi-brand or supermarket retail business, and to do away with the present 51% cap for FDI in the single-brand retail business.

The decision would allow global supermarket chains to enter the country through arrangements with minority Indian partners and permit the single-brand retailers to set shop here entirely on their own. The move would help Indian retailers get the much-needed funds for business expansion.

Experts said that the government could be sending signals, through this decision as also a few more steps like Cabinet approval for the new Companies Bill, that it was determined to counter the perception of 'policy paralysis' and a slew of long-pending reforms could be announced soon.

"The government is surely attempting to send a strong signal that "policy paralysis" has ended. The government has got into this image repairing exercise and washing some of the earlier policy procrastination," SMC Global Securities' Strategist & Head of Research, Jagannadham Thunuguntla, said.

Leading rating agency Crisil's Chief Economist D K Joshi also said that the decision was a positive move and could help stimulate the economic scenario.

"This is a positive move which will improve the currently low sentiments in the economy. This is just a start we have to wait and see whether the government is aiming for a second generation sweep in terms of economic policies," he added.

Last week, the finance ministry also increased the investment limit for foreign institutional investors (FIIs) in government securities (G-Secs) and corporate bonds by $5 billion each.

Besides, the government has listed as many as 31 bills, including mining bill, food security bill, introduction of goods and services tax (GST) and electricity distribution reforms.

"Besides passing the policies, markets will be keenly watching the policy execution and implementation as well, to get full confidence that things have started to move again," Thunuguntla said.