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House panel for ban to FDI in retail

The howls of protest against FDI in retail seem to be coming a full circle.


June 10, 2009  |  comments ( 0 )  | 
The howls of protest against FDI in retail seem to be coming a full circle. On Monday June 8, a parliamentary panel recommended a blanket ban on foreign investment in retail flagging major concerns on the politically contentious isuue. “A blanket ban should be imposed on domestic corporate heavyweights and foreign retailers from entering into retail trade in grocery, fruits and vegetables,” the Parliamentary Standing Committee on Commerce said in its report on Foreign Direct Investment (FDI) in the Retail Sector. The committee, headed by Murli Manohar Joshi, said opening FDI in retail by allowing single brand foreign firms would result in unemployment. It asked the government not to issue further licenses for wholesale “cash and carry” business to both foreign and domestic investors. At present, FDI is prohibited in multi-brand retailing, although up to 51 per cent FDI is allowed in single brand retail. Reacting to the development, Arti Singh, vice-president, corporate affairs, Bharti Wal Mart said, “Retail can be an engine of growth, not just in urban India but also in Tier 2 and Tier 3 cities offering more job opportunities and helping families save money so that they can live better and FDI in retail can only accelerate this process. The size of the Indian retail industry is estimated at $356 billion (Rs 16,73,000 crore). According to the parliamentary panels` report big retailers lure customers with predatory pricing and wipe out competition. It therefore recommended that the government impose a blanket ban on foreign investment in retail; stop issuing further licences to foreign and domestic investors in wholesale cash-and carry formats and set up a shopping mall regulator. However a government-sponsored study by ICRIER has found that there is no evidence of decline in employment in the unorganized sector after the entry of large format stores. Farmers benefit as they get 25 per cent higher prices by direct sales to retailers and less that 2 out of 100 shops are likely to close down because of competition from large retailers.

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