Column: Clear the haze in policy environment

Mar 11 2014, 03:25 IST
Comments 0
SummaryUncertainty stemming from political motivations stalls implementation and erodes investor confidence

Timing is always critical and even more so when it comes to legislation. Perhaps, our legislators should consider this, as the timing of the various legislations being notified and brought into force is, hardly ever, apt.

Take the case of the new company law for example. A few sections have been notified with no clear indication of when the other provisions will come into force. We have sections and rules being notified in fits and starts, with the industry grappling with compliance and confusing interpretations. The FDI policy pertaining to multi-brand retail is yet another instance of implementation of a policy in bits and pieces and it may be apt to use this example to describe the state of affairs.

In September 2012, the government permitted FDI in multi-brand retail, trading up to 51% under the government approval route and the policy was introduced as an enabling one. State governments and union territories were given the freedom to take their own decisions for implementation of the policy. A list of states in agreement with the policy was included. Other states could agree with the policy going forward. Towards this, the states would require conveying such agreement to the government of India through the appropriate department, upon which additions would be made to the annexed list.

Subsequent additions to the list did take place. However, they reflected more an extension of a political mindset rather than a policy success of one state being adopted by another state. This was emphasised by what followed next. Early this year, states which had originally adopted the policy began to seek withdrawal. Again, this did not reflect a failed policy. The withdrawal seemed more a political agenda to blindly reject a preceding government's decision—or maybe, motivated by a perceived political benefit, given the forthcoming elections. Withdrawal from the policy was projected as a measure to protect the interest of the smaller shopkeepers from the retail chains.

Interestingly, we have not seen any foreign direct investment post the opening up of the sector. But then it would be unfair to argue against a potential investor who finds no firm ground. The investor faces the risk of policy withdrawal; the real, on-ground consequences of a fairly successful negative campaign against the sector; and his/her projection as someone whose sole intent is to make profits by depriving the smaller, standalone shops of their income.

The readiness of an investor to come

Single Page Format
Ads by Google
Reader´s Comments
| Post a Comment
Please Wait while comments are loading...