The government sounded a positive note on Tuesday on opening up the multi-brand retail sector to foreign direct investment (FDI) by global players such as Wal-Mart and Carrefour next year. At present, the retail sector is largely closed to foreign firms, with 51 per cent of FDI allowed only in single-brand retail. Multi-brand retail is restricted to cash-and-carry or wholesale outlets.
"It is (allowing FDI in retail) very much on the agenda," said Subodh Kant Sahay, food processing industries minister.
"I am in favour of it because this will give market-driven farming to farmers."
Michael T. Duke, president and CEO, Wal-Mart, has already made a strong pitch for allowing 100 per cent FDI in multi-brand retail.
The chief of the world’s largets retailer on Tuesday said that Wal-Mart alongwith its joint venture partner Bharti Enterprises plans to rope in around 35,000 farmers by 2015 for direct sourcing of agricultural products. At present, the company sources agri-products from around 600 farmers.
The company would work dierctly with farmers on crop management and would provide more direct market access for their products. "By purchasing directly and helping these farmers operate more efficiently, we estimate that they will see a 20 per cent increase in income."
Increasing FDI in retail is likely to reduce inflation rate by 50 to 70 basis points (100 basis points is 1 percentage point), Duke said.
The Planning Commission is also in favour of allowing FDI in the R23-lakh-crore retail sector.
"FDI in multi-brand retail trading should be permitted, since it will have both positive direct and indirect effects that are of value to the national economy," the Planning Commission has said commenting on a discussion paper prepared by the department of industrial policy and promotion (DIPP).
The issue has gained an edge with the coming visit of US President Barack Obama. US businesses has long been demanding that India open up its retail sector.