An Indian government panel has reportedly recommended easing rules over foreign investment in the country’s retail sector.
An inter-ministerial group on inflation put forward the proposal as part of steps to temper inflation and cut down the margin between farm gate and retail prices, according to local press reports.
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At present, overseas retailers can own wholesale cash-and-carry chains outright but can only hold a 51% stake in single-brand outlets – like Nike stores. In a bid to protect local shop owners in India, foreign retailers cannot own multi-brand stores.
The panel’s proposal to change the regulations is the first formal recommendation by a government panel to allow FDI in India’s tightly policed and sensitive retail sector, The Times of India reported on Saturday.
Meanwhile, according to the Indian Express, the country’s chief economic advisor, Kaushik Basu, said that he was not suggesting to just “open the gates and let them [foreign investors] anywhere and everywhere”.
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The proposal, he was quoted as saying, recommends specifying specific areas where foreign retailers can invest “so there is also a lot of room for small traders”.
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By GlobalDataBasu said that extending FDI to multi-brand retail will expand organised retail and bring in new technology.
“India’s retail sector continues to be primitive…It’s time for India to allow FDI in multi-product retail and IMG recommends that the government consider this at the earliest,” he said.
He also suggested that such a move would provide farmers and consumers better prices as well as helping farmers to gain access to global markets.
“In this context the proposal is not anti-people but very pro-people as it will create a larger and more vibrant economy,” said Basu.
The comments came as inflation remains a major concern for the government, with headline inflation at 8.66% in April, much above the Reserve Bank’s comfort level of 5-6%, according to NDTV.
Wal-Mart Stores has previously signalled its interest in the country opening up FDI in multi-brand retail. It operates a cash-and-carry joint venture with Bharti Retail in India.
