Allow multi-brand retail FDI in a phased manner
The Economic Survey made a case for opening up the Rs 22 lakh crore multi-brand retail sector to foreign direct investment (FDI), suggesting that FDI in the sector could be allowed in a "phased manner".india Updated: Mar 15, 2012 23:48 IST
The Economic Survey made a case for opening up the Rs 22 lakh crore multi-brand retail sector to foreign direct investment (FDI), suggesting that FDI in the sector could be allowed in a "phased manner". The Survey expects that the FDI would improve agricultural marketing and ensure a larger degree of tax compliance by the sector.
"Allowing FDI in multi-brand retail is one of the major issues…this could begin in a phased manner in the metros with the cap at a lower level coupled with incentivising the existing mom and pop stores (kirana shops) to modernise and compete effectively with the retail shops, foreign or domestic," said the Survey.
The recommendations spelt out in the Survey are not binding on the government and the government may choose to either implement or ignore these suggestions.
"While agricultural marketing could improve with the growth of modern retail trade, the revenue could also increase, as at present the retail sector is largely unorganised and has low-tax compliance," it said.
In November last year, the government liberalised investment norms for the retail sector thereby allowing 51% FDI in multi-brand retail and 100% FDI in single-brand retail. However, bowing to stiff political opposition, the government a week later suspended it's decision to allow FDI in multi-brand retail.
Even as the decision on FDI in multi-brand retail has been suspended, the government increased the foreign investment in single-brand retail to 100% from the earlier 51%.
Multi-brand retail shops can sell goods from any brand while the single-brand retail shops can sell products from a specific brand only.