American retailer Walmart and the government of USA have conveyed their anxiety over the veto power of the states on foreign direct investment.
By providing veto power to the states, the Union government of India had said that the act will support the states to have absolute control over the foreign investors. The entry of foreign retailers, like Walmart, will be dependent on the decision of the state government.
The new policy of the union government permits foreign retailers to own and set up shops in India. However the union government is blamed for conferring veto power to the states. The state governments are given absolute power to deny or permit the foreign retailers in their state.
Though Walmart (Wal-Mart Stores, Inc. originally) was earnest to enter Indian retail market, it did not enter. They, as well as many other foreign retailers, still remain anxious over the veto power of the states. Walmart was expected to be one of the first foreign retailers to set up offices in India.
Foreign investors see the veto power of the states as a barricade. They fear that the changing State-governments will hamper their investment plans. Due to this reason many foreign investors are still reluctant to enter the retail market of India.
Adding oil to the fire, so far only 10 Indian states and the Union Territories have welcomed the new FDI policy. Majority of the states like Tamil Nadu, Uttar Pradesh and West Bengal have do not permit the entry of foreign retailers.
Speaking about the issue, Commerce & industry minister Mr. Anand Sharma informed that there will be no restriction on them to purchase goods from these states. Mr. Sharma had met the representatives of the retail major as well as the officials of US government.
US Government officials have conveyed lack of clarity in the term of minimum $100 million investment. The FDI policy makes the prescribed amount mandatory.
However, if the government is not clearing the veto power of the states the FDI policy may not be as successful as we desire. The policy aims to increase foreign investment in India. While retailers like Walmart remain skeptic of the policy, the success of the policy is on the scale.
