Govt for FDI in multi-brand retail sector

Policy paper favours allowing 51 per cent investment
Last Updated 06 July 2010, 19:46 IST

A discussion paper, prepared by the Department of Industrial Policy and Promotion for eliciting public opinion, has made out a strong case for the entry of multinational multi-brand retailers into the country.

The paper, released for public comments on Tuesday, has favoured allowing 51 per cent Foreign Direct Investment (FDI) in the multi-brand retail sector which would allow the global giants to directly set up shops in the country.

“FDI in retail may be an efficient means of addressing the concerns of farmers and consumers….(It) may, therefore, be an efficient means of addressing the concerns of farmers and consumers,” the government draft policy paper has contended.

Further, it argued that FDI in multi-brand retailing “would also assist in lowering consumer prices and inflation.” At present, the government policy allows 51 per cent FDI only in the single-brand retailing. The extension of this to the multi-brand segment would mean that the global multi-brand retailers would be able to open their shops in the country to directly sell consumer products ranging from state-of-the-art entertainment electronic goods to candy and biscuits of any brand one can think of.

First attempt

Five years ago, the first UPA government had mulled over allowing 51 per cent foreign direct investment in multi-brand retailing in the country. But it had not made much headway in view of opposition from its Left allies at that time.

Despite political sensitivity to the entry of global retailers in the retail sector, the Singh government now seems to be strongly favouring foreign direct investment in this sector as part of its moves to further liberalise the FDI policy in the retail sector.

Debate sought

Earlier this year, the Prime Minister had sought a debate on opening up the sector, pointing to the vast difference between farm gate and consumer prices.  The government, which is already confronting a “united” opposition on the fuel price hike issue, can expect fresh attacks on this issue.

There has been an overwhelming apprehension among political parties of different hues that the entry of foreign direct investment in retail business would signal the end of the conventional small “mom and pop” (kirana) stores as they would be swamped by the multi-national corporations.

Besides, there has also been widespread fear that allowing entry of global retail chains to carry on procurement of farm products and selling them in retail outlets directly to consumers would harm the interests of small-time farmers as well as consumers, who would be at the mercy of these global retailers. But the government policy paper has pointed out that farmers, in the present system, got just a third of the consumer prices for their produce.

(Published 06 July 2010, 16:10 IST)

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