India ushered in the biggest economic reforms in two decades on Friday, allowing big foreign retailers like Wal-Mart, foreign broadcasters and foreign airlines to invest in the country.
“On single brand, the cabinet has today taken the decision, 100 percent FDI in single brand has been notified,â€said Anand Sharma, the minister for commerce and industry, during a press conference in New Delhi. “The objective of the policy was to attract investment, create local manufacturing and employment,†he said.
Mr. Sharma noted that the implementation of the new policy has been left entirely to the “decision and discretion†of the state governments.
The changes were greeted with enthusi asm by industry and analysts:
Chandrajit Banerjee, Director General, CII: “Coming a day after the fuel price announcements, the decision of the Government to ease FDI norms in an array of sectors like Multi Brand Retail, Civil Aviation, Power Trading Exchanges and Broadcasting is a tremendous boost not only to the sectors in question, but is a huge mood lifter. The despondency that had set in owing to absence of policy announcements would certainly be addressed to some extent. Global and domestic perceptions would also change and CII is hopeful that the rating agencies would take due note of these announcements as well.
“The move to increase FDI caps in in these sectorsm will help mobilise capital into these sectors, which the country needs and would also improve the current account deficit situation, which was becoming alarming. Purely, from a policy point of view as well, yesterday's announcements followed by today's are an indi cation that reforms are back.â€
Rajan Bharti Mittal, Vice-Chairman and Managing Director of Bharti Enterprises: “This is a landmark decision in India's economic reforms process. Development of organized retail in India will bring immense benefits to stakeholders across the value chain â€" from farmers to small manufacturers and above all to consumers. Enhanced investment in the sector can further the cause of employment, particularly amongst youth. In addition, this decision will open the doors for much needed technology and investments to develop the entire retail ecosystem in the country. Bharti Walmart's Cash & Carry venture is already sourcing fresh produce directly from thousands of farmers as well as other merchandise from local manufacturers, thereby adding to the local economy's growth and delivering immense value benefit to its customers such as kirana stores and other institutions.â€
Tarun Das, former director general of CII: “The reform agenda is back on track.The fuel prices were raised to bring down the deficit. If the deficit is down then the Reserve Bank of India can bring down the interest rates. If the interest rates are down, people will borrow more money and invest more money. That will improve the growth. So the over all impact on the economy will be very positive. Once the domestic economy improves, it will increase the confidence of foreign investor. The FDI in retail and aviation will bring more money, better technology and improved managerial skills. The Prime Minister is for reforms and now he has his team in place. So we will see more reforms in coming months. With high interest rates the burden of borrowing money is too much for the co-borrower. So all these reforms will start a chain reaction. I am very happy that reform agenda is back. The past mistakes will be corrected.â€
