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Plan panel backs FDI in retail, revives debate

business Updated: Oct 26, 2010 01:08 IST
Gaurav Choudhury
Gaurav Choudhury
Hindustan Times
Plan panel

The Planning Commission has made a strong pitch for opening up the country’s retail sector to foreign direct investment (FDI).

The longstanding debate on this issue has gained an added edge with the forthcoming visit of US President Barack Obama next month. US business has for long been demanding that India open up its 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 DIPP paper in July made a strong pitch for throwing open the retail sector to foreign direct investment (FDI) that would allow international giants such as Wal-Mart, Tesco and Carrefour to set up mega stores in the country.

Michael Duke, President and CEO of world’s largest retail store Wal-Mart, currently in India, met commerce and industry minister Anand Sharma on Monday.

“No, there was no demand made,” Sharma said whether Duke asked for any policy change in the FDI policy regime.

“What I have mentioned (to Duke) is that as a democracy we believe in generating a discussion and consultation with all the stakeholders so that before taking any step, we create a broad-based consensus,” Sharma said.

At present, FDI in multi-brand retail is prohibited in India but the government allows 51% FDI in single brand retailing and 100% in wholesale trade.

Domestic traders lobby groups and the Left-wing political parties have expressed concern that transnational giants offering deep discount sales in mega stores would put the livelihood of neighbourhood mom-and-pop stores and street vendors at risk.

The planning commission said the fear of job losses is exaggerated. “All forms of mechanisations and modernisation do away with certain kinds of activity, as it ushers in new forms of more productive and better paid occupations. That is the essence of economic progress,” the plan panel said.