The government today said the recent decision to allow 51 per cent FDI in multi-brand retail with conditions does not violate India’s international commitments and agreements with any country.
The opening up of FDI in multi brand retail trading is a liberalisation measure and remains so with all the conditionality, given the fact that currently FDI in multi-brand retail trading is not allowed at all in India, an official statement said.
“The decision does not violate any commitments/ obligations arising out of India’s international agreements,” it added.
The statement comes a day after opposition BJP said India cannot make opening of stores by foreign multi-brand retailer in any city subject to state government’s clearance as the country has signed bilateral investment agreements with 82 countries, under which no conditions can be put on foreign investors from those nations.
The statement by the Ministry of Commerce & Industry, however, reiterated the recent policy decision did not infringe on any such agreements.
Citing the case of Bilateral Investment Protection Agreement (BIPA), it said FDI approval does not fall under it as the agreement is a post-establishment investment one implying equal treatment to domestic and foreign investors, unless the limitations to national treatment are clearly spelt out at the pre-establishment stage.
“The FDI policy is a pre-establishment instrument and therefore not covered by BIPA,” the release said.
The government further said since FDI in multi-brand retail trading was not allowed when Comprehensive Economic Cooperation Agreement (CECA) and Comprehensive Economic Partnership Agreement (CEPA) were negotiated, none of these agreements are affected by the recently approved policy.
Multi-brand retail trading is classified as a service and therefore covered by the General Agreement on Trade in Services (GATS). India has not undertaken any commitments in this area under the GATS. As such, there is no impact of the policy on our commitments under the WTO,” the government statement said.
The policy of allowing FDI in multi-brand retail says that it would be the prerogative of the states to allow setting up of stores.
“The policy nowhere provides that it is applicable only to certain states. The policy itself is a national policy and can potentially be applicable to all the states that are desirous of implementing it,” the government said.
Last Friday, the government had allowed 51 per cent FDI in multi-brand retail but left it to the state governments to permit opening of stores by foreign retailers