Multi-brand retail FDI may start in segmented way

Union commerce minister Kamal Nath said today that the Government...

Union commerce minister Kamal Nath said today that the Government, which is considering whether to allow foreign direct investment FDI in multi-brand retail, may do so in a segmented manner. Speaking at The Indian Express-hosted Idea Exchange, he said that easing of FDI norms in sectors such as apparel, footwear, electronics, stationery and books would not harm neighbourhood stores.

8220;Most of the retailers in India, 60-70 per cent of those in unorganised retail, lie outside the market economy. To them, retail in electronics will not make a difference,8221; he pointed out. He added that the Government may undertake segmentation so that sectors like electronics, apparel and footwear can gradually be opened up.

Currently, foreign companies cannot undertake multi-brand retailing in India whereas in single brand retailing, FDI of up to 51 per cent is allowed under the automatic route. Nath maintained that in the retail sector, the issue is not related to FDI; rather it is about the big versus small retailer.

The Government is treading cautiously as retail is one of the country8217;s biggest employers second only to agriculture, he assured. 8220;In retail, it8217;s not an issue of allowing or not allowing FDI; it8217;s about the interests of small traders which should be taken care of,8221; he noted.

On the issue of single brand retailing, he added that none of the single brand retail ventures has so far harmed any of the neighbourhood retailers as they address a very niche segment. As far as the impact of big players impacting the small retailers is concerned, the Government is awaiting the report of the ICRIER.

Admitting that the situation for retail is complex, he referred to Prime Minister Manmohan Singh8217;s speech earlier in the year and said, 8220;It8217;s only the mindset which will make the difference.8221;

Nath informed that the total FDI inflows during April-September 2007, calculated without retained earnings, have increased 65 per cent over the corresponding period last year. FDI inflows stood at 7.2 billion in the first quarter of this year.

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His statement comes in the wake of recent protests in some parts of the country against the opening of supermarkets by domestic retail giants. Last year, the minister had announced plans to allow FDI in multi-brand retailing for select areas like consumer durables and stationery; however, nothing came of that.

Currently, the total size of the retail industry is pegged at Rs 9,30,000 crore, with organised retailing accounting for Rs 35,000 crore according to a Yes Bank study.

Big vs Small

8226;Small traders8217; interests to be taken care of

8226;Till now, they have been largely unaffected by single brand retailing

8226;FDI inflows during April-Sept 2007 excluding retained earnings rose 65