The Bharatiya Janata Party government in Rajasthan has reversed the earlier Congress regime's decision on allowing foreign direct investment (FDI) in retail in the state.
In a letter to Union Minister of Commerce and Industry Anand Sharma, Chief Minister Vasundhara Raje said: "The (Rajasthan) government has studied the proposal and its ramifications and it is felt that permitting multi-brand retail would adversely affect various stake holders."
Raje said retail trade along with agriculture was the largest generator of self-employment.
The sources of domestic retail are primarily local whereas international retail affects domestic manufacturing activity and hence reduces employment opportunities.
She said it was also a myth that FDI in retail leads to passing on the benefits to the producers and farmers by removal of middlemen.
If indeed middlemen were removed, the benefits of eliminating them would go largely to retailers, rather than to the farmers and producers.
In view of these reasons, Rajasthan does not support FDI in multi-brand retail and would not be able to facilitate it, the chief minister said.
However, the Associated Chambers of Commerce and Industry of India (ASSOCHAM) expressed serious concern over the withdrawal of FDI in multi-brand in retail by Rajasthan, saying it would dent and shake the confidence of global investors.
"It is not a question of allowing or not allowing foreign investment in retail. If one party reverses the decision of its rival dispensation upon change of guard, the policy and political risks for global investors would definitely increase in India, scaring them away," said ASSOCHAM secretary general D.S. Rawat.