Cure for food inflation? Allow FDI in retail, says industry
Shukti Sarma 03 February 2011

In the absence of a macro-economic framework to stabilise prices, experts believe that big retailers can help to arrest prices through competition, while also generating more jobs

The debate over foreign direct investment (FDI) in key sectors continues. And at the top of the push cart is the retail sector, over which the arguments for and against have been the hottest. Now, the country's big retailers are again urging the government to come clear on its intentions regarding the sector and on foreign investment in this business.

"The government should understand that growth of organised retail will ultimately help in arresting inflation. Allowing FDI will help retailers extend their reach. But first, the government must be transparent with its policies, because ambiguity is not helpful," said Ajit Ranade, chief economist, Aditya Birla Group. This statement summed up the sentiments of Indian retail stalwarts at the CII National Retail Summit 2011 in Mumbai on Wednesday.

"Agricultural productivity has gone down, so has its share in GDP," Mr Ranade pointed out. "But the number of people engaged is the same. As a result, farmers have grown poorer. Organised retail can help create jobs and give them direct access to the market, and arrest inflation."

Raghu Pillai, CEO of the Future Group echoed Mr Ranade's views, saying that in the absence of a macro-economic framework which will stabilise prices, the government should allow the retail sector to grow. He gave the example of the much-neglected animal husbandry sector, where most of the producers are Dalits. With proper training, they could increase their products and sell them to retailers directly.  

Eminent legal consultant Zia Mody pointed out that the government's hestitation could be the result of fear of agitation by unorganised retailers. "Also, the government is probably not sure how growth in retail will precipitate into rural employment," she said.

Nandini Chopra, executive director of KPMG, said, "There are foreign retailers who have been knocking on our doors for long. But the government has failed to take a decision. The entire regulatory structure is static. I don't think things will change now." She expressed her doubts about the upscaling of FDI projects, and the availability of an investment structure for small and mid-size retailers. But she agreed that allowing FDI would help retailers create a bigger platform, and that increased competition would be the key to price stability.

Bharti Wal Mart managing director Raj Jain pointed out that FDI would bring in technology and know how also. He said, "India is regarded as a good market. But if the government does not have favourable policies, investors will look towards other countries like Brazil and Russia, which are more open. In that case, the government will lose a lot of revenues as well."

Trent Market CEO Jamshed Daboo, summarised the underlying sentiment in a sentence: "If things improve and people prosper, what does it matter what colour is the money?"

1 decade ago
the scare of unorganized retailers is is the big indian retailers like biyani who dont want competition.he moralized to us on how to protect nascent indian retailers
1 decade ago
There may be negative effects of FDI in retail but we dont have any option.Orgasnised Retail requires special skill and very big & deep pockets and only few of Indian corporates can afford the same.We already have seen death of "Subhiksha" and "Vishal".

Organisaed Retail is required because infrastructure in supply,storage and dsitribution is very weak. And FDI is must for this capital hungry country
1 decade ago
FDI in retail should be encouraged.
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