The Aam Aadmi Party (AAP)-led Delhi government has communicated to the central government that it is opposed to the idea of allowing multi-brand retail chains with foreign investment to set up and operate outlets in the state.
This is in line with its previous stance on the subject but makes it an official decision of the new state government. AAP’s party manifesto had previously said it is opposed to the policy of FDI in multi-brand retail as it affects mom & pop retail shops in the country.
In a letter to the Department of Industrial Policy and Promotion (DIPP), an arm of the commerce ministry, AAP has asked the central government to remove Delhi from the list of states which have given a green signal to multi-brand stores with FDI, according to news agency PTI.
The government had opened multi-brand retail sector to foreign investment more than a year ago. However, it left the final decision with the state government who gets to decide if they would allow such firms to open stores in their respective states.
The startup political party AAP, which recently scripted a surprising show in its maiden elections in the city state, now leads a government with outside support of the Congress.
The previous state government had supported the move of FDI in multi-brand retail though no such retailer has set up any store in the state. Given the real estate cost of operating such an outlet in the city state, a few retail firms have indicated they are looking at Delhi.
However, this could mean trouble for players such as Easyday, Bharti Group’s privately held retail venture. Bharti Retail already operates a string of such outlets in the state. Although, it is wholly owned as of now, the official decision by AAP may make it tricky for it to raise foreign money by roping in an overseas partner. The firm previously had a pact with Walmart which was called off last year.
Notably, Future Retail, which already has foreign institutional investors as shareholders, already operates a string of multi-brand retail chains in the state in different formats.
FDI in multi-brand retail has also been opposed in principle by BJP-led state governments.
Indeed, Delhi makes for the second state which has changed its stance on such retail ventures. The state of Rajasthan, which was also previously led by Congress, had also given its assent to letting such retail firms in the state. However, with BJP winning the elections in the state is it also expected to reverse the stance.
Such moves could make the recent liberalisation in policy a non-starter as MNC retailers would not open outlets in a state with the threat of the next state government asking it to pull out.
Till now only one FDI proposal in multi-brand retail has happened where UK’s Tesco has sought to buy stake in Tata Group run Star Bazaar hypermarket chain.
(Edited by Joby Puthuparampil Johnson)