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Govt may ease curbs on FDI in retail soon

Commerce and Industry Minister Kamal Nath indicates at the Mint-Hindustan Times Luxury Conference that the Govt is looking to ease curbs on FDI in retail trade and cut import tariffs for luxury goods, reports Gaurav Choudhury.

business Updated: Mar 29, 2008 21:34 IST
Gaurav Choudhury

India’s retail boom may soon get another shot in the arm. The government is looking to ease curbs on foreign investment in retail trade and cut import tariffs for luxury goods.

Commerce and Industry Minister Kamal Nath indicated a possible hike in the existing 51 per cent cap on foreign investment in single-brand retail stores and said the government would soon review its policy on multi-brand retailing, where foreign capital is completely banned.

A decision on the politically contentious issue would follow after the Indian Council of Research on International Economic Relations (ICRIER) — a New Delhi-based think-tank commissioned to study the impact of such moves on the country’s sprawling mass of mom-and-pop stores — gives its report in a fortnight from now.

“We are waiting in the next 15 days to receive the ICRIER report… we will look at further progress on this,” Nath said as he opened the third annual edition of the Mint-Hindustan Times Luxury Conference.

Vice-Chairperson of HT Media Limited Shobhana Bhartia said: “Luxury is much more than the availability of the perfect retail space and complaints over customs duties. It is about the mystique — the magic, if you will — of making customers, and I dare say they are customers rather than consumers, feel special and luxurious.”

Nath said the government would remain mindful of the interests of small manufacturers and traders. “We have to keep in mind that 97 per cent of India’s retail trade is in the unorganised market. We want to protect kirana stores, but we want to create jobs as well,” he said.

India’s retail market is estimated to total about $300 billion and is growing at more than 20 percent annually.

Organised retail stores, such as Big Bazar, Spencer’s and Reliance Retail, account for less than 10 per cent of the market that is largely dominated by some 12 million small stores.

Critics say any move to allow multi-brand retailers like US-based Wal-Mart and France’s Carrefour would drive these stores out of business and cause job losses.

“The biggest fear is the fear of the unknown,” Nath said. Two years ago, he said, when the government allowed foreign investment in single brand retail, there was a lot criticism. But it appears now that there has been little adverse impact on anyone, he said, adding the same could be true for luxury goods as well as multi-brand retailing.

We have also demanded that the interim committee submit its report in a week’s time.