Prime Minister Manmohan Singh on Friday said the decision to allow foreign investment up to 49% in organised retail trade will not hurt small traders and mom and pop shop owners.
In his address to the nation, the Prime Minister said: "Some think it will hurt small traders. This is not true."
The Prime Minister, who explained why his government was going forward with economic reforms, said modern retail was present in India and that it had not affected the growth of small shop owners.
"Organised, modern retailing is already present in our country and is growing. All our major cities have large retail chains," he said on the day when the Trinamool Congress exited from the ruling UPA demanding a rollback of last week's government decisions.
"Our national capital, Delhi, has many new shopping centres. But it has also seen a three-fold increase in small shops in recent years."
Manmohan Singh pointed out that foreign investment in retail will help farmers, create cold chain storage infrastructure to save perishable items like fruits and vegetables and create millions of new jobs.
"According to the regulations we have introduced, those who bring in FDI have to invest 50% of their money in building new warehouses, cold-storages, and modern transport systems," he said.
"Wastage will go down; prices paid to farmers will go up; and prices paid by consumers will go down. The growth of organised retail will also create millions of good quality new jobs."
The Prime Minister further said that state governments have been empowered to allow foreign investments in retail or not.
"State governments have been allowed to decide whether foreign investment in retail can come into their state. But one state should not stop another state from seeking a better life for its farmers, for its youth and for its consumers."
Singh compared the decision to allow organised retail to the one taken in 1991 for opening the manufacturing segment to investments from abroad.
"In 1991, when we opened India to foreign investment in manufacturing, many were worried. But today, Indian companies are competing effectively both at home and abroad, and they are investing around the world,"
"More importantly, foreign companies are creating jobs for our youth - in information technology, in steel, and in the auto industry. I am sure this will happen in retail trade as well."