The Hindu Business Line : FDI in retail sector continues to be a `contentious issue'

Even as India Inc under the aegies aegis of the Confederation of Indian Industry, in partnership with eight ministries of the Government of India, made a passionate plea in New York on Sunday in an effort to engage the over 2 million-strong Indian-American community in the US, as well as the entire American community, to look at Indian as an investment destination, the Commerce and Industry Minister, Mr Kamal Nath, conceded that the path of FDI in retail is not going to be a smooth one. "This is a very contentious issue and we have to take on board the fact that the Indian retail sector is the second largest employer in the country," he said, while answering a question at the Prasar Bharatiya Day meeting, the first to be held outside India. "Much of the Indian retail market is outside the organised sector and we have to ensure that FDI in retail does not replace existing employment. Also, we don't want FDI in retail to displace or replace the existing small players."

FDI in wholesale

Anyway, the result of a study commissioned by the Government on this issue will be available next month, he said.But, Mr Nath added, FDI in wholesale was another ballgame. "We've told WalMart and others that the numbers they will have in the Indian market by supplying to wholesalers would be huge." Inviting the Indian diaspora overseas to engage with India, Mr Kamal Nath said that very often he was asked questions comparing Indian with China; "China is doing this and China is doing that." But there were many differences between India and China, which had started opening up much before India. In the first 15 years of opening up China had got an FDI of only $6 billion. "In our 15th year (in 2006) we have got $15.5 billion."

Tremendous complexities

But India was is also a country of tremendous complexities. "We have 300 million people living on less than a dollar a day, so the complexities of economic management and governance, and the complexities in the polity are something that no other country has. And yet India is a country with credibility and laws that are implemented." India was is also one of the most transparent countries in the world, he said, and had a proven record of being profitable for foreign investors. Addressing the meeting and "saluting the enterprise and success of the Indian American community" the Minister for Overseas Indian Affairs, Mr Vayalar Ravi, said overseas Indians had transformed the economies of the countries they settled in. But they should remember that India too had "come of age and is today the fastest growing free market democracy" with a robust economic growth, swelling foreign exchange kitty upward of $220 billion, exports in excess of $40 billion.

NRIs' contribution

But while India's growth story had captured the global mindspace, there was a large scope for the Indian diaspora in the US to make a far greater contribution and engagement with India.

For example, India had received remittances upward of $23 billion last year from overseas Indians.

"But what is less known is the fact that nearly half of these remittances come from just 5 million overseas Indians in the Gulf." On the diaspora investments in India, the success was even lower. "The cumulative foreign direct investment by NRIs is a modest $8 billion, constituting lower than 5 per cent of the total FDI in India," he added. The bulk of the diaspora money is in portfolio investments with a time horizon of only three years, he pointed out.

Great scope

The External Affairs Secretary, Mr Nirmal Singh, reminded the Indian diaspora that the 55 million overseas Chinese had contributed to 60 per cent of the FDI in China, and there was a great scope for NRIs to engage with India in a much larger way. "We are aware that you have concerns; we have already addressed some of these concerns, and some additional benefits would be announced soon." The CII President, Mr Sunil Mittal, urged the Indian American community to engage through "serious investment" in India. Its current $1 trillion economy is expected to grow to $35 trillion before 2040, placing 35 times more income in the hands of Indians. Such a market could not be ignored."This is a very contentious issue and we have to take on board the fact that the Indian retail sector is the second largest employer in the country."

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