FDI in multi-brand retail unlikely anytime soon

To the disappointment of the multinational retailers which have been waiting for a bite of the Indian retail pie, the government on Friday deferred a decision to open up the sector to foreign direct investment (FDI) yet again.

“That decision surely government would not like to take off the cuff,” finance minister Pranab Mukherjee said in Lok Sabha, in reply to a Calling Attention motion by Gurudas Dasgupt of CPI(M). “It may be necessary to build up a larger consensus to have FDI in multi-brand retail trade.”

Mukherjee said it was a complex issue and the states would also have to be involved to arrive at a larger consensus before taking a decision.

The finance minister noted that out of 109 respondents representing various interests, 73 had expressed their opposition before an official committee to the entry of FDI in multi-brand retail.

As of now, no FDI is allowed in multi-brand retail and only 51% is permitted in single brand retail.

Multinational retail chains are permitted to come into backend retail operations and also partner with Indian companies, but cannot do front-end retail sale on their own.

The finance minister said those who opposed FDI to the committee included farmers and small traders.

He also quoted an Unctad report to point out that job losses in the informal sector far outweighed the benefits of allowing FDI in multi-brand retail.

Global retail chains such as Wal-Mart, Tesco, Carrefour and Metro have been clamouring for opening up of retail trade in the country. Wal-Mart, Metro and Carrefour have in fact already established backend operations in the country, in collaboration with Indian partners.

Many Indian chains have, however, expressed reservations over the issue.