FDI in multi-brand retail key reform for economy: FICCI
November, 17th 2011
The government seems to be moving with some degree of spree as far as FDI liberalisation is concerned. It is learnt from sources that the final cabinet note on retail foreign direct investment (FDI) is likely to be issued next week . Rajiv Kumar, Secretary General, FICCI feels that it is high time that the government should finalise the policy on permitting FDI in multi brand retail.
Speaking to CNBC-TV18, Kumar said that FDI in multi brand retail is a very crucial reform for the Indian economy. If it comes through Kumar hopes that opposition party and rest of the political spectrum will not become an impediment to this. "When it happens, we will see that states are given the opportunity to take it forward as they would like rather than being given some sort of a uniform package, Kumar added.
Below is the edited transcript of Kumar's interview with CNBC-TV18. Also watch the accompanying video. Q: A cabinet note on retail FDI which we understand will be finalised shortly. Given all of this do you think that the government is finally getting its act together and moving with a new sense of determination on second generation reforms? A: I very much hope so. My hypothesis has been that in our country the gestation period for a reform is seven years from the day the idea is conceived to the day it is implemented. FDI in retail has even crossed that time period.
So, it is high time that the government does finalise the policy on permitting FDI in multi brand retail. I have seen the news that the CoS has approved it and that 51% FDI is very much on the cards. I do hope that when the final version comes out we will see that all those other conditions that had been stipulated earlier would have been done away with. I am really very glad to hear about the FDI in multi brand retail being finally out. If it does happen, there are two things I hope. Firstly, the opposition party and rest of the political spectrum does not become an impediment in this because its a crucial reform for the Indian economy.
Secondly, when it happens, we will see that the states are given the opportunity to take it forward as they would like rather than being given some sort of a uniform package. Every state would like to do it differently. Q: The cabinet has approved the PFRDA Bill and in doing that it has retained the flexibility to hike FDI in the pension sector beyond the 26% disregarding the advice of the standing committee on finance in t
he process. We do seem to be seeing a new determination to move ahead on politically sensitive subjects, would you agree? A: I am actually thrilled about this. I see a sense of determination and a sense of finally the attempt to push the reform is in the forward. Nothing could be better for me. Its music to my ears and for the industry as a whole. I am sure that such measures would reverse the doom and gloom scenario that we have had in the industry and economy for a while. I hope therefore that the PFRDA Bill will go through, will be placed in the Parliament in the winter session. It will not have the caps because at least we need 49% FDI in the pension firms that are there. It is one thing to clear the bills and put them in the Parliaments and the other step is to get them passed.
This requires a very deft political movement and political handling. This is because what we dont want is for the situation that when the bills are there in the Parliament and then the government throws up its hand to say that what can we do? We dont have the necessary political support for it.
The second stage of this very important agenda is to garner necessary political support. We in the industry have promised to the government and ourselves that we will do whatever is required to try and mobilise necessary political support for important bills like FDI in retail, FDI in aviation and the PFRDA Bill. Q: But this good news is being dampened by another thing that what we have heard as far as the Direct Taxes Code is concerned and this has to do with the parliamentary affairs ministry saying that the DTC Bill will not make it to the winter session implying quite clearly that the 1st April 2012 rollout is not going to happen. Now that also puts into jeopardy the rollout of the GST. Does this mean that there is still some distance to go on tax reforms even though FDI liberalisation maybe picking up pace?
A: Thats indeed true. For me the GST is a far bigger, far more crucial and far more important measure than the DTC because that is simply cleanup, very necessary though. It will clean up the Direct Tax Code but the GST is a real fish to go for and we are scheduled to meet the chairman of Empowered Committee Modi later on this month. We have been emphasizing to him the importance of that bill for the Indian industry to become globally competitive and for the Indian market to be integrated.
I wish and I really hope and plead to the government and all political parties that this is one bill that they should really pursue with as much vigour. That will just bring about the whole paradigm shift in our country as far as indirect taxes are concerned.