India's finance minister Pranab Mukherjee made no mention of Foreign Direct Investment (FDI) in his budget speech on Monday, much to the disappointment of India's retail sector, reports Express India.
Modern chainstore operators in India and abroad had expected the government to use the budget to announce a relaxation of India's existing laws governing FDI, after it released a report last week in favour of phasing-in foreign direct investment.
In India, 100 per cent FDI is currently prohibited in multi-brand retail, but allowed in cash-and-carry wholesale trading. Up to 51 per cent FDI has been allowed in single-brand retail since 2006.
Global retail giants like Wal-Mart, Carrefour and Tesco have been lobbying the Indian government to open FDI in multi-brand retail.
"This budget was the best opportunity for the government to make any announcements related to FDI relaxation in retail, but it is extremely disappointing to see that nothing was mentioned," one Indian retail chain director told the publication.
"The government had looked receptive to the idea, but given the fact that no news has come today means that there is still some problem, most likely political," he added.
But Future Group chief Kishore Biyani said Monday's budget announcements about strengthening India's farm sector and cold chain investments indicated the government's willingness to open up multi-brand retail to FDI in future.
"All the measures announced today are a precursor of things to come," he said.
India's finance minister Mr Mukherjee said India's rural economy would be at the heart of the national budget, in his speech on Monday.
He announced a credit flow target of Rs4,750bn (US$105bn) to the agriculture sector and offered a 3 per cent interest subsidy to farmers, according to the Financial Times.
Mr Mukherjee said India needed to invest far more in agriculture to boost productivity and enlarge storage facilities to help reduce the spiraling prices of fruit and vegetables.
Rising prices of commodity crops like onions and sugar in recent months have hurt urban and rural populations.
Ashok Gulati, the Asia director of the International Food Policy Research Institute, told the Financial Times that: "`Indian` Agriculture is crying for a clean sweep of market reforms as was done for industry `20 years ago`."
He said agriculture is "strangled" by government controls, suspension of future markets and export bans.
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