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Mr Kishore Biyani (left), Chairman, CII Committee on Retailing, with Mr Marut Sen Gupta, Regional Director, CII-Western Region, at a press conference in Mumbai on Thursday. — Paul Noronha

Mumbai , Oct 6

INDIAN retailers are showing signs of anxiety over the Government's growing keenness to allow more FDI in the retail segment.

Top retailers gathered today at a CII forum favoured phased FDI in the sector. They urged the Government to target such FDI at the development of infrastructure in tier II and tier III cities, particularly in the food supply chain.

According to Mr Krish Iyer, MD and CEO, Piramyd Retail, the retail industry needed to explore alternative funding routes.

He urged the Government to allow FIIs and venture capital firms to participate in investment in the primary market, which would substantially raise capital formation for the industry.

Currently, FIIs and venture capital firms can only participate in listed retail companies in the secondary market.

He said that the sector would need investments of Rs 1 lakh crore by 2010. However, the domestic retail sector would perhaps only see about Rs 5,000-7,000 crore of investments in the next 5-7 years. Most of the current investments are in real estate.

According to Mr Kishore Biyani, Managing Director of Pantaloon Retail (India) Ltd, while none of the Indian retailers were against the entry of FDI, the Government needed to create a level playing field for domestic and foreign retailers.

He said that the retail segment was one of the largest generators of employment.

Also, encouraging consumption in the domestic market would lead to economic growth.

He did not recommend delaying greater FDI in the sector, but said: "FDI should not kill current industries; the idea is to protect them and look to future growth."

He added that several regulatory aspects needed to be taken care of before FDI rules are liberalised.

The retail trade is valued at Rs 9.3 lakh crore and the organised sector accounts for Rs 35,000 crore. In the urban areas, organised retailing currently accounts for about 20 per cent.

The Government is already considering measures such as imposing a minimum limit of 10,000 sq ft on the floor space of foreign retail chains.

Also, the reservation of 500-600 sq ft (out of 10,000 sq ft) of retail space for foods and processed foods will protect the interests of certain sectors such as agriculture and integrate them with the organised retail supply chain. These measures are to be applicable for a short while only.

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