Our Bureau

New Delhi, Feb. 23

WITH the issue of allowing foreign direct investment (FDI) in retail sector under its consideration, the Government has said that if permitted, the FDI should lead to incremental economic benefits and not substitute on-going activities.

"We have a large retail sector of which 2 per cent is in the organised segment and the rest in the unorganised space... FDI in retail should provide incremental growth without displacing or replacing the organised or unorganised retail sector," the Union Minister for Commerce and Industry, Mr Kamal Nath, said at a FICCI seminar on `Retailing in India: a Government policy perspective'.

Stating that the Government was looking at the issue with a sense of urgency, he said, "If we look at the food sector, it is the most compelling reason as 40 per cent of our fruits and vegetables rot due to lack of processing facilities. How do we leverage FDI in this? Should we not look at giving priority in retail, to food and vegetable sector so as to drive the cold chain."

Initiating a public debate on the subject of FDI in retail, he said foreign investment in organised retailing would generate employment, both direct and indirect, but there was no question of it being allowed to replace or displace existing players. He said the Government was discussing the issue of FDI, but a decision on the areas where foreign investment would be directed would depend on consumer benefits and growth of the sector.

"There is an incremental growth in the retail sector on annual basis, and the sector is growing at the rate of 35-40 per cent. A thrust to the sector will boost the economy and the potential must be leveraged. We must do it as fast as possible," he pointed out.

"Fixation of committing or not committing FDI in retail sector is misplaced. FDI is a tool to be used to achieve policy. Therefore, it is important to understand the objectives and policies of the retail sector and then move forward," he said.

(This article was published in the Business Line print edition dated February 24, 2005)
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