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New Delhi, April 13

OPENING up the retail sector to foreign direct investment (FDI) would be beneficial for India in terms of price and availability of products, according to the World Bank.

At the launch of the Global Development Finance Report 2005 at a function, organised by the Federation of Indian Chambers of Commerce and Industry (FICCI), here, the World Bank Director, Development Prospects Group, Mr Uri Dadush, said, "The retail sector in India today is a case of low core sector, both domestically and internationally."

Asked whether FDI or using foreign exchange reserves would benefit countries such as India, Mr Dadush said the World Bank did not consider FDI as a primary investment source and one cannot see any trade-off between FDI and reserves.

Citing the report, he said the FDI inflow to India was estimated at $5.3 billion, higher than the $4.3 billion in 2003.

The World Bank has predicted that global growth will slow down to 3.1 per cent in 2005, as a result of the increase in US interest rates, fiscal tightening, and the effects of the 25-per cent real effective appreciation of the euro.

Further, 2006 may witness a slight deceleration in growth.

The report has cautioned developing countries on the need to make adjustments because of the risks posed by ballooning global imbalances, particularly the US' current account deficit.

It has embraced three key challenges: managing the vulnerability inherent in global economic and financial imbalances, confronting the risks posed by the growing market sensitivity of developing-country debt, and mobilising and diversifying sources of finance for low-income countries.

In order to minimise the risks, there is a need for developing countries to avoid excessive accumulation of debt, even when it is domestic debt, the report has stated.

(This article was published in the Business Line print edition dated April 14, 2005)
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