Shot in arm for FDI in retail

New Delhi, July 22: A Committee of Secretaries today recommended 51 per cent FDI in multi-brand retail with riders.

The recommendations of the committee, headed by cabinet secretary Ajit Kumar Seth, will be sent to the cabinet.

“We will seek the clearance of the cabinet before the sector is opened up,” R.P. Singh, secretary in the department of industrial policy and promotion, said. However, no timeline has been set for the cabinet approval.

Sources say the committee has set $100-million as investment floor; at least 50 per cent of this amount has to be in back-end infrastructure such as cold storage, soil testing labs and seed farming.

India annually loses more than Rs 1 lakh crore of farm products, including fruits and vegetables, because of lack of proper infrastructure such as cold chain storage and warehousing.

The committee said multi-brand retail shops should be opened in cities with over a million population. The number of cities that will meet this criteria according to the 2001 census are 36, and it can increase in census 2011.

Sources said the CoS, however, rejected the suggestion of some ministries that 30 per cent of the value of the manufactured items procured (excluding food products) had to be sourced from small and medium enterprises.

Global retailers such as Walmart, Carrefour, Tesco and Metro AG have long sought greater access to the fast-growing but restrictive retail sector.

At present, India does not allow FDI in this lucrative sector, which employs 33 million people and is dominated by local grocery stores.

However, 51 per cent FDI are permitted in single brand retail and global chains such as Nike and Louis Vuitton have set up shop here. There is no restriction on foreign investment in the wholesale cash and carry format business.

Political issue

The BJP and the Left parties have been opposing the opening up of retail as it will affect the livelihood of millions of people employed directly and indirectly by the sector.

BJP president Nitin Gadkari has said “several reports and studies suggest that FDI in organised multi-brand retail sector may hamper the interests of small retailers”.

The BJP has asked for more debate on the subject.

India’s retail sector is estimated at about $590 billion, according to an Icrier report.