A study in contrasts

The catchphrase in the Congress manifesto is "Make for the World", even though it is silent on multi-brand retail

The Congress party’s manifesto for the 2019 election is high on global focus and talks of foreign direct investment (FDI) in glowing terms, but it’s silent on multi-brand retail. That’s disappointing. Possibly, it wants to play safe ahead of a critical election as local traders, constituting a large vote bank, still fear massive job losses if international retail chains were to enter India.

In its 2014 manifesto, the Congress had this to say about FDI in multi-brand retail: “The historic decision by the Congress-led United Progressive Alliance (UPA) government to allow FDI in multi-brand retail will transform the agrarian economy as it will create a beneficial value chain from farm-to-fork, creating rural infrastructure for sorting, grading, packing, cold storage facilities and warehousing. It will ensure that the farmer gets a much higher value for her or his produce.” There is no room for any aversion to foreign investment, it had said then. The time was such. The UPA government had then allowed up to 51 per cent FDI in multi-brand retail, giving hope to top global chains such as Walmart, Tesco, Carrefour and others despite hurdles like mandatory sourcing from India. Soon after, foreign retail majors had to put all their plans on hold when the National Democratic Alliance (NDA) took charge at the Centre. The NDA never struck down the multi-brand FDI policy framed by the UPA government, but it was as good as frozen in time. No FDI proposal in multi-brand retail was cleared during the last five years, and there’s no recorded information on whether any was ever submitted between May 2014 and April 2019. 

Cut to 2019 and the Congress party’s manifesto has been shy of mentioning FDI in multi-brand retail, a UPA regime achievement, which Rahul Gandhi-led party could have bragged about like many other things. “Retail FDI” has gone missing in the manifesto. It’s the same for “multi-brand retail”. This is what the manifesto says on FDI on the whole, without spelling out any sector specifically: “FDI will be welcomed in all sectors, subject to exceptions on the ground of national security.” Since multi-brand retail is unlikely to be a matter of scrutiny vis-à-vis national security, the manifesto implies that FDI will be allowed in the sector. However, since multi-brand FDI has been in a no-man’s land for five years, a voter should have been told clearly what the party plans to do with that category of business.

Much has changed in the intervening five years. Walmart, the biggest threat for the neighbourhood stores (kiranas), has moved on. The Bentonville-based retail major may still like to open mega stores across Indian cities to tap the spending middle class in the country, but it invested $16 billion to acquire a majority stake in Bengaluru-based Flipkart last year. French chain Carrefour, having waited for multi-brand opportunity in India, has exited the country.

More than individual companies, the narrative has taken a turn. Digital, whether Indian or international, is perhaps a bigger disruptor than any foreign major could be. As a result,   local traders are now against both foreign players and internet majors, also funded by global investors. 

If the Congress manifesto is to be believed, FDI will be accorded national treatment and there will be a level-playing field for foreign and domestic investors. This is too broad stroke and does not quite convey the real message and if foreign multi-brand retail and Indian retail will be on par. If there’s a level-playing field, even the mandatory sourcing regulations should be removed for retail companies getting FDI. That may be tough given the focus of any party including the Congress on job creation in small and medium sector businesses.

While multi-brand FDI is a grey area, some others that became household words during the Narendra Modi government have found mention in the Congress manifesto. Start-ups, for instance. The party claims it would create an Enterprise Support Agency to help entrepreneurs, including start-ups, with all-round business support. Another promise is, it would remove the controversial Angel Tax imposed on start-ups if it comes to power. It does not talk directly about “Make in India”, a signature scheme under the NDA rule. But it states that anything that can be made in another country can be made in India, and that the Congress will formulate rules and reward entrepreneurship in a way that will make the country a global hub of manufacturing. The catchphrase in the Congress manifesto is “Make for the World”, instead of “Make in India”. It’s a different matter that they may end up saying the same.