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India to be cautious in allowing FDI in retail

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`Viability of 15 million small shops has to be ensured'

Kolkata , May 27

The Centre's decision on allowing foreign direct investment (FDI) in the retail sector — if and when such a decision is taken — would be "cautious, gradual and calibrated", according to Dr Ajay K. Dua, Secretary, Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, Government of India.

As of now, the Government has permitted FDI in single-brand stores. Three applications in this regard have been made to the Government. While one has been made by Moza Trading for Nike shoes, the other two applications have been made by Louis Vuitton and Spanish figurines maker Lladro.

Addressing a seminar on retail organised here by Images Multimedia and later speaking to newspersons, Dr Dua said the Government could not allow unfettered FDI in the retail sector. It would be imperative to ensure the viability of the existing 15 million small shops that exist across the country and which provide employment to over 20 million people. Ninety-eight per cent of these 15 million small retail shops belong to the unorganised sector and, thus, it would be all the more important to ensure that they continue to remain viable.

"The services sector is highly employment-intensive. Any opening up of the retail sector should not adversely affect 15 million enterprises and those that are employed by them," Dr Dua said.

According to him, the rate of growth of organised retail in India was higher than unorganised retail. With the lowering of import duties, and exposure through the media spurring consumerism, organised industry was beginning to take a larger share of the incremental pie.

"There is some concern that, with the coming of organised retail trade, there could be some displacement of unorganised stores. The Government is trying to ensure that this displacement is kept at the minimum," he said, adding that it would auger well for all if the growth in organised retail was derived from the overall incremental growth in retail demand.

Asked about FDI in cold chains, Dr Dua said there was no restriction on procuring technology from outside without necessarily having to go through the investment route.

"If we start selling foods in retail formats, investments in cold chains will take place automatically," he said, and added that, globally, after apparel, retail in foods has followed.

Speaking on the occasion, Mr Kishore Biyani, Group CEO of The Future Group, said while FDI in retail was inevitable in the long term, India should be in no hurry for this to happen. "The retail market in India has been pegged at $300 billion, in relation to a population of 1.2 billion. How much of FDI can the sector attract so as to make a huge difference," he asked.

Mr Harshvardhan Neotia, Managing Director of the Bengal Ambuja Group, said large-format stores could well co-exist with small retail shops provided the latter reorganised themselves to keep in tune with the times.

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