New Delhi: In a major decision signalling the end of policy paralysis in the UPA government, the Cabinet Committee of Economic Affairs (CCEA) on Thursday accepted 51 per cent foreign direct investment (FDI) in multi-brand retail.
The government has, however, left the option to invite multi-brand retail on the states.
There is an opt out clause in the FDI in multi-brand retail, which has been the most contagious of the issues. According to the clause, "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."
Prime Minister Manmohan Singh said at the meeting that the time had come for big bang reforms. "If we have to go down, we have to go down fighting," he said.
Notably, the issue had been pending for quite long because of opposition from key UPA allies such as the Trinamool Congress.
The government also approved foreign direct investment in aviation, broadcasting and power exchanges.
The decision means that foreign airlines will now be allowed to invest as much as 49 per cent in the Indian carriers. Also, the FDI cap on various streams of broadcast services has been raised to up to 74 per cent.
In another important decision, the government approved the disinvestment of five Public Sector Units (PSUs), including Oil India (10 per cent), Nalco (12.5 per cent) and Hindustan Copper (9.59 per cent).
The move by the government evoked sharp reactions from key UPA ally, the Trinamool Congress. The party said that it would protest against the move and asked the government to review its decision.
TMC spokesperson Kunal Ghosh said, "We strongly oppose the move. we demand that the government should review this decision or we will protest."
Union Railways Minister and TMC MP Mukul Roy said, "We are opposed to FDI in retail. We will discuss on the future course of action."
The party of Mamata Banerjee even went on to set a deadline of 72 hours for the government to roll back its decisions on FDI and fuel.
Another key ally, the Nationalist Congress Party (NCP), however, backed the decision saying it would provide a boost to the economy.
"FDI is retail will benefit the farmers and the common man," said senior NCP leader Tariq Anwar.
Reacting to decision of the government, the Left said that the move would create further crisis in the country.
CPM leader Gurudas Dasgupta said, "This will not stimulate the economy, instead it will have adverse affect on small traders."
"Politically, the government is going down. The government under Prime Minister Manmohan Singh is responsible to the decline in the economy," he further said.
CPI leader D Raja called the move anti-national saying the party strongly opposed the move.
India Inc, however, welcomed the move with the FICCI terming it as a "big step".
FICCI general secretary Rajiv Kumar said, "This is a big step. We welcome this move," adding, "We hope the Opposition will not target the move as it is good for the economy."