FDI in retail: Govt treads cautiously

Unlike the defence sector, the government has adopted a cautious approach on opening up multi-brand retail to foreign investment, department of industrial policy and promotion secretary R P Singh said on Wednesday.

"We have left it (fixing a cap on FDI) open. Based on the response which we get from the stakeholders, we will take a view," Singh told PTI.

The secretary of the DIPP -- which is responsible for the policy on the country's foreign direct investment -- indicated that the government has taken a cautious approach in the case of multi-brand retail.

"We have not taken a clear stand like we did in the case of defence. We did not give a stipulation as to what should be percentage (for FDI)" he said.

As a formal move towards permitting entry of global retailers like Wal-Mart, Carrfour, Tesco and Metro, the DIPP released a discussion paper on Tuesday inviting comments from stakeholders by July 31.

India, at present allows 51 per cent FDI in single brand retail and 100 per cent in the cash-and-carry (wholesale) formats. Though permitted in 1996, FDI inflows of just $195 million (about Rs 900 crore) have come in the single brand retail segment, comprising 0.21 per cent of the total FDI into the country.

Single brand investment is confined to sportswear, luxury goods, apparel, jewellery and handbags.

In the case of cash-and-carry trading, FDI of $1.77 billion (about Rs 8,000 crore) has come since April, 2006, when it was brought under the automatic clearance route, though it was opened in 1997.

In the paper on FDI in defence, the DIPP favoured 75 per cent foreign investment. It had said that even 100 per cent would be desirable. However, the ministry of defence is known to be opposed to increasing the FDI cap beyond the existing 26 per cent.

Asked how soon multi-brand retail, a politically sensitive sector employing about 33 million people in the neighbourhood mom and pop (kirana) stores, would be thrown open for overseas investment, Singh said it was difficult to fix a timeline.

"We cannot say... depends upon the kind of response we get, kind of concerns people express," he said, adding, "We have to find ways of addressing (concerns) and we are trying to build a consensus to the extent possible."

He said concerns over the impact on small traders by the entry of big retailers have to be taken on board. "You have to see how to integrate the retail sector with this value chain, that is important," Singh said.

Singh said it also has to be seen how unorganised retail should cope with the competition.