After dilly-dallying for four years, the government is gathering courage to finally roll out the ‘biggie’ reform: the opening up of retail. The Centre on Tuesday floated a political trial balloon by issuing a discussion paper on allowing global retail chains such as Wal-Mart and Carrefour to operate in India, and sought comments from the public and stakeholders.
Currently, such entities are allowed to set up only back-end operations in India, mainly due to opposition from those who fear big foreign players will put local kirana stores out of business. The thinking in government circles is that such foreign investment is key to ease the massive supply bottlenecks, especially in the agricultural sector, and bring down stubbornly high inflation. The sector requires Rs64,000 crore in the next five years to do this, the government said.
Through the paper, it builds the case to allow so-called multibrand retail, and seeks to allay concerns, saying that even after the introduction of organised retail in countries such as China, the number of small shops grew.
“The FDI percentage could be between 49% and 51% based on all considerations and the conditions should not be too onerous,” Rajan Mittal, vice chairman of Bharti Enterprises, which already has an alliance with Wal-Mart, and the president of industry association Ficci told PTI.
Tuesday’s paper is the second to test attitudes to lifting investment caps in sectors eagerly watched by investors. The first suggested almost tripling the FDI cap on defence equipment to 74%.
Global operators such as Wal-Mart and Carrefour have long coveted India’s fast-growing $450-billion retail sector, which is dominated by neighbourhood mom-and-pop shops.
“Some movement on retail is better than no movement,” said Rajiv Kumar, head of the New Delhi-based think-tank Icrier. “Finally it’s dawning on the government that food price inflation can be tackled. One way to tackle food price inflation would be to modernise the post-harvest logistics and supply chain, and retail can contribute to that.”
Wal-Mart is already present in India through cash-and-carry stores supplying in bulk to fuel Bharti’s retail stores, but it wants to enter the retail market. “This would be a good reform measure to have completed before president Barack Obama’s visit (to India) in November,” Icrier’s Kumar said.
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