Global retail giants such as Wal-Mart, Carrefour and Tesco may have to wait a little longer to set up shop directly in the country. The government does not seem to be ready yet to open up the multi-brand retail sector for foreign direct investment, though pressure is building on the finance ministry to allow FDI into the sector.
“We have not yet taken any decision on opening up the multi-brand retail sector,” finance minister Pranab Mukherjee said on the sidelines of the annual conference of the Asian Development Bank in Hanoi.
Currently, 51% FDI is allowed in single brand retail, while for cash and carry operations, it is 100%. However, the government has faced severe opposition from various corners on opening up multi-brand retail sector.
Several stakeholders have said that the local ‘mom and pop stores’ and the unorganised sector retailers would be hit adversely by the entry of the mega global retail chains into the country.
The government had earlier indicated that a consensus was critical for opening up the sector.
Earlier, a discussion paper, prepared by the department of industrial policy and promotion made a strong case for the entry of multinational multi-brand retailers into the country, favouring 51% FDI in the multi-brand retail sector.
The Economic Survey for 2010-11 has also underlined the need to allow FDI in multi-brand retailing. However, the survey said that it could be opened up in a phased manner.
While countries including China, Brazil and Singapore have allowed FDI in retail trading without limits on equity participation, Malaysia has equity caps on FDI in the retail sector.
“Permitting FDI in retail in a phased manner beginning with metros and incentivising the existing retail shops to modernise could help address the concerns of farmers and consumers,” the survey said.