Customers shop at a Best Price Modern Wholesale store, a joint venture of Wal-Mart Stores Inc and Bharti Enterprises, in Jammu yesterday. The government on Thursday approved 51% foreign direct investment in the retail sector, paving the way for firms such as Wal-Mart Stores Inc, Tesco and Carrefour to enter one of the world’s largest untapped markets
IANS/Jaipur


The government’s decision to allow foreign players in multi-brand retail will help bring down prices, thus sobering inflation, a senior Reserve Bank of India (RBI) official said here yesterday.
“In multi-brand retail, the things can be shipped at a cheaper rate from the producer to the consumer,” the central bank’s deputy governor Kamalesh Chandra Chakrabarty told reporters on the sidelines of an industry event.
“So, if you are able to pass on the benefit to the customer, then the price comes down and if prices are reduced, so will inflation. Globally it has been seen to have happened,” Chakrabarty said.
The central cabinet on Thursday decided to allow 51% foreign direct investment (FDI) in multi-brand retail, stating that it would help bring down inflation, reduce wastage and improve farmer productivity.
The cabinet also allowed 100% equity in single brand retailing.
According to Chakrabarty, the model, if implemented effectively, is known to lead to decline in prices.
“Globally, it is considered if effectively implemented, prices decline. The difference in the price between producers and consumer gets narrowed if implemented in a correct manner,” he said.
Commerce Minister Anand Sharma said guidelines for the new policy will be announced within a week, and it will be for states to decide which retail chains should operate on their soil.
“The implementation guidelines for the FDI will come out in a week’s time. It is for the states to decide in favour of the policy. I am happy to note many state governments have agreed to embrace the policy,” Sharma said in Chennai.
According to him, Punjab, Haryana, Maharashtra, Rajasthan and Orissa have indicated their acceptance of the new policy.
“We hope Andhra Pradesh from south to come in favour of the new policy. We will wait for the formal communication from the state governments,” Sharma said.
He denied the central government was trying to shift the responsibility of creating retail back-end infrastructure (cold storages and others) on the retailers as it was not able to create it despite announcing in the successive union budgets.
“The government is building cold storages but the requirement in India is huge,” Sharma said.
On the fears that small retailers will be wiped out of business, he said: “The licensed retailers can get their merchandise from cash and carry outlets at discounted rates. In Indonesia, 90% of the retail business is with small retailers, and in India 85% is in the unorganised sector.”
According to him the new policy will benefit small and medium enterprises (SME) as retailers with FDI will have to source 30% of their merchandise from them.
However, the sourcing is not restricted to Indian companies but can be done from companies located anywhere in the world, provided the investment in plant and machinery in those units are less than $1mn.
In Lucknow, Uttar Pradesh Chief Minister Mayawati said Congress general secretary Rahul Gandhi pushed the United Progressive Alliance (UPA) government to push foreign equity in retail, adding she oppose the measure.
“The Bahujan Samaj Party (BSP) will launch a strong movement against the policy in case the UPA government manages to get the approval of the national parliament,” she said.
“The union government’s decision to allow FDI in retail in India was clearly prompted by Rahul, who is simply interested in extending certain benefits to his foreigner friends through this new policy,” Mayawati alleged
Referring to Gandhi as “yuvraj” (prince), she said: “Since this yuvraj has spent the larger part of his life in foreign lands, where he also has a large number of friends, he has found FDI in retail as one way of extending favours to them.”
“People in the Congress-led UPA government cannot afford to displease Rahul’s friends who are looking forward to reap a huge harvest out of this FDI move,” she alleged.