C Rangarajan today said allowing foreign direct investment (FDI) in multi-brand retail should start with minority participation as was done in the case of insurance sector to help a large number of domestic retail organisations grow on the back of FDI.
“We should start with minority participation before embarking on allowing a larger chunk of FDI in the retail sector,” he said while refusing to buy the argument that FDI would kill small stores in the country.
Though the US has 7-8 large retail organisations, it did not kill small retail shops as each has a role to play. But a stiff competition between the two is possible as both have their own advantages, according to him.
“By allowing FDI in smaller proportion in the manner similar to the insurance sector where 26 per cent FDI was allowed, Indian organisations would also come into operation,” Rangarajan said.
Stating that FDI would not help much in checking inflation, he said, “FDI should be welcomed for other reasons. I do not necessarily agree to the view that FDI in retail should be viewed from the angle of inflation.”
Foreign companies, including governments of their respective countries, have sought opening up of the retail sector. Currently 100 per cent FDI is allowed in cash and carry wholesale trading while it is prohibited in multi-brand retail. Up to 51 per cent FDI was allowed in single-brand retail in the year 2006.
A draft note prepared by the Department of Industrial Policy & Promotion (DIPP) has stated while FDI in multi-brand retail should be allowed up to 51 per cent, only states have the right to give the final permission to set up such stores.
Source : Business Standard