The shares in the retail sector in the country has fallen after government coalition members Samajwadi Party as well as left parties expressed their opposition to the government’s plan to allow foreign direct investment into multi-brand retail sector.
According to media report in the country, the leaders of the political parties have written a letter to the Prime Minister Manmohan Singh expressing their opposition to the move. The department of industrial policy and promotion of the India government had put forward a proposal to allow 51% FDI in multi-brand retail and 100% in single-brand retail in the country during 2011.
Most union ministries are believed to have given their consent to the proposal and a decision is expected next week on the matter. The proposal includes a condition that at least 50% of the total FDI should be in back-end infrastructure. The government will only allow large deep discount stores in cities with population of more than 10 lakhs and only in states that allow FDI in multi-brand retailing.
Retail stocks including Pantaloon Retail India and Provogue India fell as much as 8.3 percent on reports of opposition by the political parties to the FDI proposal. Provogue India dropped 8.31 percent, Pantaloon Retail fell 6.42 percent, Shoppers Stop shed 5 percent, Koutons Retail declined 5.79 percent, Brandhouse Retails fell 5.93 percent, and Tata group firm Trent was down 3.14 percent.
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