Women shop at a retail supermarket in Mumbai
India allows FDI in retail, aviation sectorReuters

Opposition parties and some of the partners of the UPA have tagged the economic policy of letting Foreign Direct Investment (FDI) into Indian markets mainly the retail sector as an anti-farmer and anti-public decision.

Policy makers are of the opinion that by allowing foreign chains to claim larger stakes in Indian retail markets will help improve India's sluggish economy and investment grade-status, besides containing the swelling inflation.

UPA has put several such economic reforms on back burners after facing protests from its allies and opposition in the past. Many expect the Centre would roll back its decisions on FDI owing to the protest even this time.

The crippling economy and fears of the country's credit ratings downgraded to junk, was a wake-up call for UPA leaders who have been battling corruption charges against their rule for the years.

Many experts opined that the government's decision on FDI in retail and aviation was long overdue and would be a game changer. Local traders, on the other hand, accuse the government of taking a hasty decision without any measures to safeguard their interests.

Below are some opinions experts and traders have shared with Reuters on allowing FDI into retail and aviation sectors:

Abheek Barua, Chief Economist, HDFC Bank, New Delhi

"If you are looking for ... a direct trigger factor that has led to all this being bunched together and pushed through in a bit of a rush, I would think that it's pressure from the rating agencies.

"If this sustains, and it's not sort of rolled back on Monday or something, it certainly does the trick (to stave off a rating downgrade)."

Praveen Khandelwal, General Secretary, Confederation of All India Traders

"It is unfortunate that despite opposition from their own allies they have chosen to again reopen foreign investment into the sector. It is surprising the government has again reopened the sector without announcing any solid measures to protect small traders.

"We will oppose this move even more strongly this time and are hopeful the government will roll back its decision just the way they did last time."

Samiran Chakraborty, Regional Economist, Standard Chartered Bank, Mumbai

"These measures were pending for a long time and the government has now shown political courage to push things through. The process of clearing all these got delayed and it is just that all are coming together.

"As an immediate impact, business and consumer sentiment will improve, stock market will improve. But I don't think RBI will cut rates after these measures because the impact of these steps on supply side will only be in the medium term.

"The government's intention is to pacify rating agencies or convince them that government is taking the right steps. This should buy some time and rating agencies may wait for the final fiscal deficit number before deciding on India's rating."

Kishore Biyani, Chairman, Future Group, Mumbai

"We are hoping this time the government will stick to its decision (allowing FDI in multi-brand retail) because that is absolutely essential.


Pinakiranjan Mishra, Partner Retail, ERNST and Young, Mumbai

"This time the way the government decided to implement the decision to allow foreign players is smart. Now there is no pressure on states who do not want to implement it.

"This should calm the opposing allies and the opposition parties.

"When Value Added Tax was introduced, states had the option to choose whether they wanted to implement it in their states and eventually everybody opted for it when they looked at its benefits. FDI in retail should be a similar case."

Andrew Holland, CEO Investment Advisory, Ambit Capital, Mumbai

"Is it (the spate of reforms) a game-changer? Yes, it would be if it goes through. We've still got to hear what the opposition and the allies have to say about this."

Gaurav Kapur, Economist, Royal Bank of Southland, Mumbai

"After yesterday's move and the opening up of FDI, these are the steps you need to take, definitely something which is positive.

"The policy stasis that you've seen for so long is basically now being tackled...basically they are moving in all the directions in which the new finance minister talked about.

"Hopefully they will stick to it and not go back like they did in the case of retail earlier, so that's what remains to be seen. Otherwise I think everything is in the right direction."

Rajan Bharti Mittal, managing Director, Bharti Enterprises, Gurgaon

"This is a landmark decision in India's economic reforms process. Development of organised retail in India will bring immense benefits to stakeholders across the value chain - from farmers to small manufacturers and above all to consumers.

..This decision will open the doors for much needed technology and investments to develop the entire retail ecosystem in the country."

Sharan Lillaney, Aviation Analyst, Angel Broking, Mumbai

"FDI in aviation has always been approved, this is just an approval for foreign airlines. This was not something out of the extraordinary, so there is no question of it being reversed.

"I don't think there will be a flurry of investments, but airlines in better shape will definitely see interest from foreign airlines, such as SpiceJet, Indigo or Jet.

"There are a lot of people interested."

Rajiv Anand, MD and CEO, Axis Mutual Fund, Mumbai

"This is something that we have been waiting for many years, but what is also interesting is the pragmatic approach that has been taken where rather than try and get 100 percent consensus across states, what they have indicated is FDI in retail is permitted as long as each state government has the flexibility to approve it. So some states might approve it today while others may wait for a while, so looks like there is no scope for a rollback like last time.

"I think the total that has been looked at for disinvestment is about 15,000 crore rupees (150 billion rupees), I think the government will be able to raise that sort of money easily through a mix of foreign, domestic retail and institutional money."

Taina Erajuuri, Fund Manager, FIM Asset Management, Helsikni

"This is a great news. I have been waiting for a long time and I had almost given up.

"Foreign investors were getting fed up with India because nothing was happening there. People would now feel more comfortable to see at least some of the reforms measures going through.

Srividhya Rajesh, Fund Manager, Sundaram BPN Paribas Asset Management, Chennai

"These are the measures which were expected for a long time now. The moves will have long-term implications. If the conditionalities are not too harsh, the decisions would result in sharp jump in foreign fund inflows.

"It's a big opportunity for the foreign firms because India is a growth market and they are mostly operating in mature markets. These moves show the government is working on all fronts to revive growth."

Harish Agarwal, Bond Dealer, First rand Bank, Mumbai

"The bond market is unlikely to react much ahead of the policy. The reform moves may prevent the rating downgrade or delay that for the next 3-6 months. The market will await the second half borrowing calendar to see how much the fiscal slippage is.

"Personally, I still do not expect a rate cut on Monday but (expect) a 100 basis point cut in statutory liquidity ratio."

Subramanian Sharma, Director, Greenbank Forex, Mumbai

"All the negativities on the rupee have been factored in. The diesel price hike will help address the fiscal deficit. All the negativities created will change by all this reform action.

"The rupee should breach 54 to a dollar on Monday and I expect a 2-3 percent gain in the rupee from current levels. The rupee should move towards 53.20-53.50 to a dollar in near term."

Siddhartha Sanyal, Chief India Economist, Barclays Capital, Mumbai

"This is not a coincidence but looks like a gameplan to meet some possibly internally set deadline as the government might want to go back to the rating agencies and try to convince them with these measures. The reason for the timing also could be because the political cycle is coming to a close in a few weeks time with Gujarat elections in November.

"The positive impact could be on stocks which should have a positive kickback impact on disinvestment and, therefore, fiscal consolidation. In a situation like this, improved sentiment will have a broad impact. I don't think the market will behave very negatively even if there is a marginal roll back because market will focus on the positive actions."

(With inputs from Reuters)