Labour ministry 'never approved' FDI in retail

In a way, the split in Parliament on Thursday on the merits of foreign direct investment (FDI) in retail is a less serious stalemate. For, a little over three months ago, this was a proposal that the ministry of labour and employment had refused to give its unconditional nod, according to a source familiar with the development.

In fact, in August, the ministry had expressed its disapproval as it was not sure about the kind of impact the policy might have on job generation in the country, the official said on Thursday.

The disapproval of the ministry was expressed by the then Labour Secretary Prabhat Chaturvedi. He noted in his observation that the government should initiate an impact study focusing on the labour sector before taking any decision on the FDI.

Chaturvedi, the source told Business Standard, even argued that the government must conduct a detailed study on the proposed FDI’s impact on labour. This was in the wake of a government-appointed study by the Indian Council for Research on International Economic Relations had concluded that the flow of foreign investment in retail would lead to job losses in the short term.

“The labour ministry’s opposition was because of the criticism that FDI in retail would lead to massive loss in jobs. Thus it wanted the government to first carry out a detailed analysis,” the person said.

Chaturvedi “even went to the extent of explaining” that since the government usually carried out studies on environmental impact, “it should do the same arguing” on the impact on labour. The labour ministry’s uneasiness apart, the Cabinet did not agree to the proposal for carrying out the study.

Other sources say that labour and employment minister Mallikarjun Kharge remained silent throughout last week’s crucial Cabinet meeting. “He didn’t express any concern,” said a source about last Thursday’s huddle that approved the FDI-in-retail decision.

One Cabinet minister noted that he was “surprised” by Kharge’s silence, considering the direct effect the government’s decision would have on the labour sector. Another Cabinet member too — the source claimed — was conspicuous by his silence: external affairs minister S M Krishna.

In its FDI policy, the government notes that the flow of FDI in retail will create about 1.7 million jobs in the next five years, and “indirect employment generated on the supply chain to feed this retail business will add millions of jobs”.