The entry of foreign capital in India's retail sector will bring about an immediate correction in prices, and it is in the country's interest to harness the resources that will flow in from large global retailers, chief economic advisor Kaushik Basu said on Friday.
"In the short-term there may be a very small amount of turmoil… but a price flattening will take place," Basu said at the Hindustan Times Leadership Summit here.
Basu said a strict enforcement of competition law and compliance with regulatory processes will ensure that the move to open up India's retail sector will benefit all stakeholdersl, including local "kirana" grocers cited by critics as likely victims.
Basu said the urge being displayed by foreign retailers to enter the Indian market offered lessons for policy makers to harness the potential.
"It is naïve to argue that foreign retailers would be entering India for their own benefit. It's like a river. The flow of the river can be harnessed to generate electricity," Basu said.
"The urge for MNCs to enter India is a very, very powerful urge," he said.
Basu said opening up FDI can ensure vast growth in India's retail sector to the extent that even "middlemen" can benefit by the sheer scale of growth.