The Hindu Business Line : Decision on FDI in retail unlikely in UPA regime

New Delhi, May 7 The Government is unlikely to take any major policy initiatives with regard to foreign direct investment in retail in the near future.

This is because, apart from the broad political opposition, the Government has come under severe pressure from scores of trade and industry bodies from across the country against FDI in retail.

A total of 44 trade and industry associations have represented to the Department of Industrial Policy and Promotion (DIPP), which is the administrative ministry for this, on the issue.

The list of associations represents a diverse social spectrum ranging from retail traders’ welfare bodies to consumer protection groups, district vyapar mandals to divisional insurance employees associations as well as from organisation of chemists and druggists to hardware dealers associations.

The reasons cited by them are equally diversified. While the basis objective is to stop FDI in retail, the associations have cited many different reasons.

Reasoning against FDI

The Federation of Associations of Maharashtra says that since retail trading does not involve any specific technology and does not require large scale investments, so FDI should not be permitted. On the other hand, the Federation of Retail Traders Welfare Association has said that since WTO agreement does not make it mandatory to allow FDI in retail trading, it should not be allowed.

A demand for putting in place precautionary safeguard measures to protect the Indian small scale industry has been made by the Ambattur Industrial Estate Manufacturers’ Association.

Interestingly, the representation made by the All India Organisation of Chemists and Druggists has not directly appealed for stopping FDI. It has sought deferment to a more appropriate time to provide breathing space to its members to prepare themselves to face competition from foreign investors.

Report delays

Added to this pressure, the Government is faced with administrative limitations due to time constraints. It has not yet received the two reports it had commissioned to the Indian Council for Research on International Economic Relations (ICRIER) and the National Council of Applied Economic Research (NCAER) on the retail sector.

The ICRIER study is to assess the impact of organised retailing on unorganised retail trade and the NCAER study is on growth linkages of FDI in India, focusing on the impact of FDI in rural economy.

The ICRIER report commissioned in March 2007 was supposed to be submitted by July 2007. However, it has still not submitted the final report and has now said will do so by July this year, DIPP sources said.

After receipt of the reports it will take another two to three months for the department to study them and by then it would get closer to general elections and policy decisions will have to be kept in abeyance, sources pointed out.