Government starts debate on opening up retail trade to FDI

After keeping the lid on FDI in the politically sensitive multi-brand retail business, the government on Tuesday threw open a debate on opening up the sector saying it would not only help farmers earn more but also keep the price-line under check.

“Keeping in view the large requirement of funds for back end infrastructure, there is a case for opening up of the retail sector to foreign investment,” the Industry Ministry said in a discussion paper released on Tuesday, but with the caveat there was a need for enough safeguards for domestic traders as also employment opportunities.

While FDI in multi-brand retailing is prohibited in India, foreign investment in single brand retail — since being opened in April 2006 — is about Rs 900 crore, said the paper, on which comments are invited by July 31.

Pointing that India was losing agri products, fruits and vegetables to the tune of Rs 1 lakh crore annually, the paper said that establishment of cold chains and back end infrastructure could cut down the losses by more than half.

While there had been political resistance to the idea on the presumption that global players would swallow the small ’mom and pop’ (kirana) stores, the industry has been pitching for allowing FDI in retail sector.

Even Prime Minister Manmohan Singh had earlier this year sought a debate on opening up the sector pointing to the vast difference between farm gate and consumer prices.

Almost echoing the views, the paper pointed out that the farmer, in the present system, gets just a third of the consumer prices for their produce. “FDI in retail, may, therefore, be an efficient means of addressing the concerns of farmers and consumers.”

Besides, the paper also sought to make a strong case in favour of small retailers in the unorganised sector, saying their growth was constant at around 15 per cent annually compared to dip in profits recorded by the organised retailers.

“It is therefore clear that organised retail cannot have a cake walk and will face a growing challenge from the unorganised sector,” the ministry said, in an obvious bid to dispel fears of threat to livelihood from corporate giants and MNCs.

thehindu.com