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Sep 17, 2012, 09.32 AM IST | Source: IBNLive.com

Govt stays firm on FDI despite political fury

The government's big ticket reforms, FDI in aviation and FDI in retail, have left allies furious. Trinamool Congress chief and West Bengal Chief Minister Mamata Banerjee has given the UPA a 72-hour deadline to roll back retail FDI and fuel price hike but Commerce Minister Anand Sharma has made it clear that there will be no turning back.

The government's big ticket reforms, FDI in aviation and FDI in retail, have left allies furious. Trinamool Congress chief and West Bengal Chief Minister Mamata Banerjee has given the UPA a 72-hour deadline to roll back retail FDI and fuel price hike but Commerce Minister Anand Sharma has made it clear that there will be no turning back.

Talking to CNBC-TV18, Anand Sharma said last year's decision to allow FDI in multi-brand retail was put off, only to bring all stakeholders on board. "This is a well considered decisions, not taken in last 24 hours. The states who don't want FDI will not be forced," he said.

Also Read: FDI in multi-brand retail, aviation, 4 PSU sell-offs okayed

While many states including Kerala, West Bengal and Uttar Pradesh continued to oppose FDI in retail, Sharma claimed that most of the states were on board on the reforms. "Gujarat has communicated nothing to us on FDI," he said.

Congress General Secretary Digvijaya Singh also tweeted, "Another example of double speak of BJP who wanted 100% FDI in multi-brand retail during the NDA and now opposing it."

Earlier on Friday, while announcing the reforms, Anand Sharma said, "The UPA government built consensus, but some states such as Bihar and West Bengal had reservations."

At the Cabinet meeting, Prime Minister Manmohan Singh also said, "The time for big bang reforms has come. If we have to go down, we have to go down fighting."

The UPA government left the country surprised pushing long-pending big bang reforms on Friday evening. Just like Manmohan Singh had put the survival of his government at stake over the Indo-US nuclear deal in UPA-I, he once again stood firmly to push bold economic reforms.

At the meeting of the Cabinet Committee on Economic Affairs (CCEA), the government on Friday cleared foreign direct investment (FDI) in multi-brand retail, single-brand retail, aviation, broadcasting and power exchanges.

In multi-brand retail, an issue that has been troubling the government for quite some time, the Cabinet decided to allow 51% foreign direct investment. However, unlike the last time, the government has let individual states decide whether to allow it or not.

There is an opt-out clause in the FDI in multi-brand retail, which says, "Retail sales outlets maybe set up in those states which have agreed or agree in the future to allow FDI in multi-brand retail under this policy. This is an enabling clause. This means that no FDI in retail will be allowed in any state unless the state explicitly agrees to come on board and agree to the policy."

The Cabinet also approved the proposal of the Department of Industrial Policy and Promotion for amendment of the existing policy on FDI in single-brand product retail trading. The government permitted FDI, up to 100%, in single brand product retail trading, subject to specified conditions.

Relaxing the norm in single-brand retail where FDI is above 51%, the government said that while 30% of the sourcing would have to be done from Indian companies, they may not be from medium and small scale, village or cottage industry. However, it said that it should preferably be done from them.

Notably, it was earlier mandatory in case of FDI over 51% that 30% sourcing should be done from small and medium scale, village and cottage industry.

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