India Inc today cheered defeat of the motion moved by the Opposition in the Lower House of Parliament seeking withdrawal of the government's decision to allow foreign direct investment, or FDI, in multi-brand retail.
Corporate bigwigs said this will send a strong signal to foreign investors and enable the government to take up further economic reforms.
"This will be a game changer for kick-starting economy," Kiran Mazumdar-Shaw, Chairperson and Managing Director of Biocon, said.
"It is extremely encouraging. A very good signal for reforms. India Inc cheers FDI vote win, said Adi Godrej, Chairman of Godrej Group.
Strong favourable words also came in from Mehul Choksi, Chairman and Managing Director at Gitanjali Group. "Major investments can be expected now that FDI in retail has got the approval of the House."
"It is a welcome development. We fully support the government on the issue. The country needs to move forward. We need to send a strong signal to foreign investors," said FICCI President R V Kanoria.
Expressing similar sentiments, CII Director General Chabdrajeet Banerjee said: "It is an important thing. It will boost the government's confidence to implement key economic reforms. This move would definitely help the government in passing the other important and pending reform measures very quickly."
Retailers Association of India also hailed the development saying it is "a big positive step".
"This is one more step towards encouraging those who have been sitting on the fence to invest in India," Retailers Association of India CEO Kumar Rajagopalan said. He, however, said there were other issues, like not all states allowing FDI in multi-brand retail, which need to be resolved for more foreign investments to come in the sector.
The decision to allow FDI in multi-brand retail got the approval of the Lok Sabha as the Opposition motion seeking immediate withdrawal of the decision was rejected convincingly. In division, 471 votes were cast, 253 MPs voted against the BJP motion challenging the government's policy decision and 218 voted for it. The BSP and Samajwadi Party, which provide external support to the government, helped it win by walking out before the House voted.
Assocham President Rajkumar Dhoot said that the move "would become a milestone in the economic reforms saga. The economy in particular and the nation as a whole will derive lot of benefit from this move."
The immediate effect would be spike in the inflow of much-needed foreign investment in India, he said.
WHAT LIES AHEAD
Now that the government has won approval in the House, retail sales outlets may soon be set up in those states that have agreed or will agree in future to allow FDI in multi-brand retail under this policy. The establishment of the retail sales outlets will be in compliance of applicable state laws/regulations, such as the Shops and Establishments Act, etc.
However, retail sales outlets may be set up only in cities with a population of more than 10 lakh as per 2011 Census and may also cover an area of 10 km around the municipal/urban agglomeration limits of such cities. Also, retail locations will be restricted to conforming areas as per the master/zonal plans of the concerned cities and provision will be made for requisite facilities such as transport connectivity and parking.
In states or Union territories not having cities with population of more than 10 lakh as per 2011 Census, retail sales outlets may be set up in the cities of their choice, preferably the largest city and may also cover an area of 10 km around the municipal/urban agglomeration limits of such cities. The locations of such outlets will be restricted to conforming areas, as per the Master/Zonal Plans of the concerned cities and provision will be made for requisite facilities such as transport connectivity and parking.
At least 50 per cent of total FDI brought in shall be invested in 'back-end infrastructure' within three years of the induction of FDI, where 'back-end infrastructure' will include capital expenditure on all activities, excluding that on front-end units. For instance, back-end infrastructure will include investment made towards processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, ware-house, agriculture market produce infrastructure etc. Expenditure on land cost and rentals, if any, will not be counted for purposes of backend infrastructure.
With inputs from PTI