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Govt may allow FDI in multi-brand retail, invites feedback

Category  :  Industry
Date  :  Jul-07-2010 12:59

The Government of India has asked the feedback from different stakeholders whether Foreign Direct Investment (FDI) in Retail should be permitted or not.Organised Retail in India is going through tuff-time, as it has become the symbol of the big corporates taking away the business of small shops and a touchy socio-political issue affecting the "Aam Admi" or Public.On Tuesday, the commerce department released a discussion paper seeking whether overseas investment should be allowed in multi-brand retail, indicating that some changes might be afoot.The Department of Industrial Policy and Promotion (DIPP) said that FDI in retail may be a proficient means of addressing the concerns of farmers and consumers.Opening of FDI in retail could also help in bringing technical proficiency to set up efficient supply chains, which can act as models of development.Besides, it would also assist in lowering consumer prices/inflation.The government suggests capping FDI in multibrand retail to a certain extent as also capping a certain amount of the investment for setting up the backend supply chain.Meanwhile, the government is encouraging only serious players in the sector and restricting the likes of FIIs stipulating that a minimum 50 % of the jobs in the sector should be reserved for the rural youth.Making mandatory a minimum amount of packaged goods to be sourced from the SMEs and for a calibrated reform process, the stores should be allowed to come up only in places that have a population of more than 10 lakh people.The Industry Ministry has sought stakeholders'' view by 31st July 2010.Currently, FDI in multi-brand retail is restricted in India. However, the government allows 51 % FDI in single brand retailing and 100 % in wholesale trade.Currently, organised retail accounts for only about 5 %, out of the estimated $450 bn Indian retail sector.There are around 3.5 crore small and medium business units in India of which retail sector constitutes 1.8 crore units. Credit is a major obstacle in growth of franchising.The paper stated that India was losing agri products, fruits and vegetables to the tune of Rs. one lakh crore every year. The establishment of cold chains and back-end infrastructure could cut down the losses by more than half.

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