The Indian Government had its new investment policy affirmed by
Parliament on Friday 7th December 2012.
In September of this year, the current
Government of India was very bold, in the face of intense
opposition, to announce that it would allow foreign direct
investment ("FDI") in the multi-brand retail
sector. It was stated that foreign retailers would be allowed to
hold 51% shares in an Indian company involved in multi-brand retail
subject to satisfying a number of conditions to ensure that foreign
parties invest significant amounts especially in
developing back-end infrastructure.
Opposition to the multi-brand policy resurfaced during the
winter session of the Parliament with a number of political parties
including a member of the present coalition demanding a vote on
this issue. The reason why the multi-brand retail policy has come
under attack, is because the policy was made by way of executive
order and not as a result of a parliamentary bill. The executive
order allows each State Government to decide whether to implement
Opposition to FDI in the multi-brand retail sector is based on a
perceived threat to small family businesses and self-employed
The debate went on in the lower house of Parliament for two full
days after which there was voting. The debate
then continued in the upper house of Parliament. Today
the present Government has had its policy affirmed by a slim
majority vote. It received 253 votes as against 218 votes of the
opposition in the lower house; and received 123 votes in
the upper house as against 109 of the opposition. Two political
parties walked out without voting in both houses. The
results of the voting means that the new foreign investment
policy in respect of multi-brand retail will remain.
Despite the new policy, it is unlikely to be easy for any large
foreign chain to operate in India, unless they restrict themselves
to the States which have provided support to the policy from the
start, such as Andhra Pradesh, Assam, Delhi, Haryana, Jammu &
Kashmir, Maharashtra, Manipur, Rajasthan, Uttarakhand, Daman &
Diu and Nagar Haveli.
Because these new FDI regulations on multi-brand retail
were made by way of "government policy" and not by
passing a new law, it may be risky for investors to rely on these
regulations. If the government changes the regulations could change
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