Owing to the unrelenting stand of its allies and the impasse it had reached with its political opponents, the government has been compelled to put on hold FDI in retail. If the objective of this policy initiative was to restore people's confidence in the government's commitment to economic reforms and earn back its political authority, the end result is far removed from the desired goal.
FDI investments in retail were subject to stringent stipulations including permission only to enter cities that have a population of above one million, a minimum investment of $100 million, of which 50% is to be used on back-end infrastructure and the requirement that 30% of the goods must be sourced from small-scale industry.
Voices of dissent, both within the UPA and from the Opposition, were heard right after the announcement. Confusion also arose on what constituted back-end infrastructure and whether sourcing from small-scale industry needed to be done domestically or could be from anywhere. And, over the next few days, there was turmoil in Parliament.
Compelled to take corrective action, the government tried to run a campaign on the benefits of FDI in retail: new manufacturing activities; new jobs, lower prices of products; benefits for the farmers et al. But none of this cut any ice with the mass opposition to FDI in retail. By this time, it was reported that perhaps even the government and the Congress party were not on the same page.
Eventually, the government was forced to announce that the decision has been put on hold till a consensus on the matter is reached. A threadbare analysis of the sequence of events is important to examine whether coalition politics can alone be blamed for the government's recent predicament.
Source: Economic times
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