After Delhi, Rajasthan scraps FDI in retail

Following Delhi, Rajasthan has scrapped the decision to allow foreign direct investment (FDI) in multi-brand retailing, evoking sharp criticism from the commerce minister, who said “states cannot retract unilaterally on such commitments”.

Rajasthan Chief Minister Vasundhara Raje wrote to Commerce and Industry Minister Anand Sharma reversing the decision, which was confirmed by a top state official.

Anand Sharma said, “If a duly elected state government formally notifies its willingness to implement the policy within its jurisdiction, it cannot retract unilaterally on such commitments.” 

The ministry, according to a senior official, will soon be seeking the opinion of the Law Ministry on states withdrawing their consent to implement the FDI policy in the multi-brand retail sector.

“It is a clearly settled matter that FDI policy falls within the remit of the central government. To say that a new government has the authority to withdraw its support to the FDI policy is bad in law. FDI policy in the sector has been discussed, debated and voted upon in both houses of Parliament and has reached a finality,” the minister said.

The intention of the policy, he said, was not to create uncertainty, instability and unpredictability.

However, he added that under the Shops and Establishments Act, state governments “are well within their rights to define their regulatory framework for all retailers – foreign or domestic.”

Rajasthan has become the second state after Delhi to withdraw FDI approval in multi-brand retail, following a change of government after the Assembly elections held in November and December. The Congress had lost to the Bharatiya Janata Party in Rajasthan and to the Aam Aadmi Party in Delhi.