Retail FDI Hopes Linger
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The plan to give foreign supermarkets access to India's retail industry is "very much on the government's mind", finance minister Pranab Mukherjee said on Friday, weeks after New Delhi was forced to backtrack on the reform.
"Yes, we announced FDI policy in retail but it could not be implemented. But that does not mean we have shelved it", Mukherjee said at the annual general meeting of the industry chamber PHDCCI on Friday.
Recently, the government failed to get the PFRDA Bill, aimed at reforming the pension sector, passed due to the opposition from UPA ally Trinamool Congress.
Mukherjee said the government was now working for a political consensus on foreign direct investment plans in supermarkets and a delayed pensions bill.
This follows PM's meeting with industry captains on Thursday where the normally reticent PM broke his silence to blame industry leaders for spreading despondency with their criticism of the government without understanding the compulsions under which it operated. The PM's Council on Trade and Industry was attended by Ratan Tata, Mukesh Ambani, Sunil Mittal, Deepak Parekh, Rahul Bajaj, Mukesh Ambani and NR Narayana Murthy.
Earlier this month, the government had to suspend its plans to open India's $450-billion supermarket sector to foreign firms such as Wal-Mart Stores Inc, backtracking from one its boldest reform initiatives in the face of a huge political backlash.
Despite the loss of face, the Prime Minister on December 14 had told in an interview with Bloomberg that he expected to succeed in his push to open the domestic retail market to foreign companies after regional elections concluded by the end of March.
In the interview, Singh had also reiterated that India's economy would return to a long-term growth rate of 9 per cent as inflation slows and the government extends market-opening policies, Bloomberg reported.
Growth At 7.5% in FY'12: Pranab
On Friday, the finance minister said that in light of global economic outlook amid the eurozone crisis and slow recovery in the US, "when I am talking of 7.5 per cent (economic growth) I am not disappointed." India clocked GDP growth of 8.5 per cent in 2010-11.
Raising the issue of policy reforms, he said, "commitment on FDI, PFRDA, all the major legislations, which are part of the new generation reforms, are very much in the mind of the government. We are working hard to build consensus".
The Finance Minister said volatility in the global commodity prices and the high domestic inflation was adversely impacting the Indian economy.
"Situation is difficult...(but) at the same time we have the capacity and resilience to overcome the difficulty collectively," Mukherjee said.
Though there are challenges on the fiscal front, he said "the challenges are to be overcome collectively by appropriate polices, effectively implementing it...".
However, he cited lack on numbers to push legislations.
"We decided to have PFRDA legislated in this session of Parliament but could not do so ...not because of lack of intention or commitment...you have to recognise the very hard fact that legislation requires numbers which unfortunately Indian electorate has not given to us," Mukherjee said.
Referring to financial sector, Mukherjee said the health of Indian banks is good as their Tier-I (equity) Capital is higher than the norms specified by the Reserve Bank.
On oil prices, Mukherjee said "Brent crude (which India imports)...has never come down below $107-108 per barrel during the last 11 months".
He said high crude oil prices not only put pressure on oil marketing companies, but also have an impact on the entire economy.
Prime Minister Manmohan Singh on Thursday warned India's economic performance was affected by the possibility of a severe crisis in the Euro zone and sluggish US growth, combined with volatility in global food markets and high energy price.
India's food inflation eased sharply to 1.81% in the year to 10 December on lower prices of rice, cereals and vegetables and benefiting from a higher statistical base a year ago, indicating sticky headline inflation could be moderating.
India faces a challenging fiscal situation as slowing revenues due to slower growth have pressured government finances.
Many analysts say the government will overshoot its budgeted fiscal deficit target of 4.6% for the current fiscal year by as much as a full percentage point.
The rupee has fallen nearly 20% against the US dollar from its July highs.