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Protests shake confidence of Minister Kamal Nath in FDI in retail sector

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The protests in Uttar Pradesh, Kerala and the national capital against organized retail appear to be impacting on the government as Commerce and Industry Minister Kamal Nath said “it is not (about allowing) Foreign Direct Investment, the issue is that of large versus small retailers.”

Speaking at the first ‘Pravasi Bharatiya Divas’ in New York, Nath told a questioner that the fate of 330 billion dollar retail market opening to foreign investments was a ‘’sensitive issue’’ though organized retailers account for only three per cent of the retail market, with the rest being made up of mom and pop outlets and kirana stores.

Such remarks by the minister could well send wrong signals to foreign investors specially in a sector which has been witnessing rapid growth and tieups taking place between leading western groups like Wal-Mart with Bharti retail.

It is indeed ironical that these comments by the Minister who is known to be a strong supporter of opening up the retail sector to FDI comes at a time when India is ranked World number one in the AT Kearney Global Retail Index 2006.

In August, the Uttar Pradesh government ordered the closure of Reliance retail in the state citing law and order problems, while Kerala has not permitted opening of western-style food retail stores in the state.

Asked if this meant large retailers would have to be prepared to close shop anytime the government feels like, Nath sough to pass the buck saying “That is not under my ministry. Ask the Consumer Affairs Ministry.”

He said the government wants to promote only incremental growth in the retail sector, but did not elaborate how it would find out the number of small retailers that have been displaced by big corporates.

“This is a very contentious issue.”

The Minister, however, said foreign investors were free to put their money for creating logistics or providing back-end operations an area where the government allows 100 per cent FDI.

Industry estimates suggest that over the next four years, organised retail in India will receive investments in excess of 25 billion dollar from domestic and foreign players, taking the size of organised retail to 75 billion dollar.

Nath asked foreign investors to bear with the government if there were any delays in clearing investment proposals, as it was facing most situations for the first time.

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