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FDI in retail: finance ministry forms internal panel

business Updated: Sep 27, 2010 20:40 IST
HT Correspondent

The finance ministry has formed an internal panel to finalise its view on the politically contentious issue of foreign direct investment (FDI) in multi-brand retail sector.

“The ministry is actively engaged in formulating its view on the subject taking into consideration the diverse opinions it has received. A committee to examine and analyse these responses and provide necessary input for the proposed policy action has been set up,” a finance ministry official said requesting anonymity.

The department of industrial policy and promotion (DIPP) had floated a discussion paper in July making a strong pitch for throwing open the retail sector to FDI that would allow international giants such as Wal-Mart, Tesco and Carrefour to set up mega stores in one of the world’s hottest growth economies. The paper said FDI in retail may be an efficient means of addressing the concerns of farmers and consumers.

The discussion paper has also sought to know whether it should not be made mandatory for 50 per cent of all foreign investment to be invested in creation of back-end infrastructure, and reserve half of all jobs in the retail sector for rural youth.

The finance ministry, while not taking any position on the issue, has maintained that the paper “comprehensively captures the scenario in multi-brand retail in the Indian context.”

The ministry of food, consumer affairs and public distribution, however, said FDI should be permitted with a cap of 49 per cent. “This will help local enterprise to upgrade their technology and practices to face competition from MNCs,” the food ministry said in its comments on the discussion paper.

It said that as much as 75 per cent FDI should be spent on back end infrastructure, logistics and agro-processing.

“We are hopeful of a very early finalisation of the policy,” the finance ministry official said.