Shop till you drop, the MNC way

NEW DELHI: Policy-makers in UPA government are veering round to a politically do-able package for permitting FDI into India’s burgeoning $180-billion retail trade market.
If all goes well, global retail majors — such as Wal-Mart and Carrefour, which have shown interest in entering the Indian market after their foray into China — could soon be vying with the neighbourhood pop-and-son stores for a share of your shopping bill.
The three-pronged initiative aimed at evolving a suitable FDI policy for retail sector now seems to be converging into a package.
It can be sold politically for its potential spinoffs of large-scale job creation, increased economic activity and value-addition in farm and food sectors.
As Prime Minister Manmohan Singh indicated this week, government is yet to hit upon the right policy-mix, but it certainly is on its way to finding one soon, and this would get the necessary political support.
The policy for a measured opening of retail sector is very much on reforms agenda for the next few weeks and officials expect the move to fructify before the PM’s July visit to US.
On the basis of the policy deliberations between Planning Commission, ministry of commerce and industry and that dealing with food and consumer affairs, officials see the possibility of even 100 per cent FDI being allowed into specific segments of retail trade.
The priority is to build supply chain and retail distribution of products from the farm to the market.
If the policy gets approved, global brand owners may be allowed to bring in FDI to open their own showrooms and stores.
So far, MNC brands in India — such as Nokia — are allowed a presence in retail outlets only through franchising.
The policy package for FDI is being evolved keeping in view the fact that unorganised trade and small shops (or pop-and-son shops) at present account for as much as 98% of retail market share in the country.
The policy to open up the sector for FDI thus has to be essentially aimed at increasing retail market and not at displacing these small shops.
The organised retail trade in India is, however, growing at 30%. It indicates that potential for market expansion is rather high.
Officials say that any policy has to have safeguards to ensure livelihood of a large section of small traders and shopkeepers.
There could be locational restrictions, allowing foreign investors in retail to operate only in big cities.