Some states against FDI in multi-brand retail: Montek

Tuesday, March 1, 2011

NEW DELHI - Some state governments in India have expressed reservations against foreign direct investment (FDI) in multi-brand retail and said they won’t allow it even if the federal government chose to do so, Planning Commission Deputy Chairman Montek Singh Ahluwalia said Tuesday.

“States are divided on the idea. Some say they have no problem while many have raised apprehensions,” Ahluwalia told reporters on the sidelines of the annual meeting here of the Federation of Indian Chambers of Commerce and Industry (FICCI).

He said the federal government would not take the decision on opening up the retail sector without taking states into confidence.

“State governments have an important role. Even if the central government takes the decision to allow it, the actual implementation will depend on the state governments, said Ahluwalia.

Currently foreign direct investment up to 51 percent is allowed in single-brand retail, while cash-and-carry stores can have 100 percent foreign ownership. However, none are allowed in multi-brand retail.

Ahluwalia said allowing foreign players in multi-brand retail would help control prices of essential items, especially food products, in the long run.

“If we allow FDI in retail today it will take at least two-three years to have a substantial impact. While inflation is an immediate concern, it needs to be brought down immediately,” he said.

Allowing foreign investments into multi-brand retail has been a hotly debated topic with those opposing it arguing that global retail companies would wipe out existing small mom-and-pop stores, thus taking away livelihood of millions of people.

Domestic trade associations have also warned that big retail players would eventually control pricing and use their huge procurement requirements to bully farmers into selling at lower prices.

But those in favour have been arguing that all such fears are unfounded and that entry of established global companies will strengthen India’s weak supply chain, reduce wastage, bring down prices of various goods and assure farmers of procurement of their produce at right prices.

Filed under: Economy

will not be displayed