Fdi and Retail
Fdi and Retail
Fdi and Retail
TRADING"
The following comments/ suggestions/ views have been furnished by
various firms/traders as per the list enclosed at Annexure.
\ ,
FDI in MUL.TI BRAND RETAILING
7.0 iSSUES FOR RESOLUTION
7. 1 Should FDI in multi brand retail be permitted? If so, should a cap on investment be
imposed? If so, what should this Gap be?
Ans: .-
No.
Hence the question of imposing a Cap doesn't arise. Also .beceuse, this would kill the
existing retail sector, dominantly unorganized, and would meke this second largest
employing sector in the country, with a 33.1 million people employed, loosing its
employment significantly.
7.2 To develop the retai! trade in food grains, other essential commodities and multibrand
retail in general; should FDI be leveraged for creating back-end infrastructure? To
ensure that foreign investment makes a genuine contribution to the development of
infrastructure and logistics, should it be stipulated that a percentage of the FDI coming in
(say 50%) should be spent towards building up of back end infrastructure, logistics or
agro processing?
Ans:
Inview of the answer to 7.1 above is no, the answer to "this will naturally be Not
Applicable. '
However, two points have to be mentioned:
1. As the discussion paper points out, there is already a provision in the present FDI
statute that 100% FDI is allowed in Cold Chains, etc. But, surprisingly, aesplie the
tremendous scope, no major investments in this sector have come.
2. Wh~n major corporates, like Reliance, The Aditya Bir/a group, etc, are allowed into
Multi-Brand Retailing why this condition of establishing "Back End and Supply
Chain Investments" was not insisted.
Instead, the Retail Trade should be given Industry Status and provide incentive to
\ '(
Ans: ..
There are three contradictions here:
1. since large multi-brand retailing<is.:a r:ily,centric:concept, dJDw,canJ5D%,Dftb~ jobs
be reserved for 50% of rura/youth.,
2. If the intention is to increase employment,opportunities 1:0 :mral youth, w1}y ;wa,~this
not insisted when big corporales,welfJ,Bllowedinfo ,Multi-i-'.Brand ..f.ltitailu,lJ
3. FDI in this sector, is not going to tJpenany ~r;bBinSinf'UTal ,areas :tmd 1hey will
establish their units onlyJn.major:urban ,BTBBS,~theyWDuld:onlysppoinf .urben
literate people.
7.5 Similarly, to develop our SMEsector' t.l1rougl:1.10car.SDJ./rcing,$DouJtJ.we .. stipulate
mtha~t?a minimum percentage of manlifscfUTed-prodaetsfbesovrcer.rfmm1he:SMEsector
in
Ans: ..,
.
windows?" make these big retailers as intermediaries. Or alternatively, if the small retailer,
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buys from the farmer and then sells it to big Retail Chain, he would become an
intermediary. Either way this leads to intermediary, which the Discussion paper abhors.
7.7 As a part of a calibrated reform process, should foreign investment for such stores
be initially allowed only in cities with population of more than 10 lakhs (2001 census)? As
there may be difficulties faced with regard to availability of real-estate in such cities for
setting up such ventures, should an area of1 0 kms around the municipal/urban
agglomeration limits of such cities be included within the definition of the city?
Ans
In the Cities there are already retail chains and malls.. Inste..adof allowing FDI and neW
units in the market in this sector, the existing system can be continued.
7.8 Will any of the conditionalities mentioned above be inconsistent with our
commitments under the agreement on TRIM at WTO? If not, to ensure national treatment,
can such conditionalities be extended to all retail chains in India above a certain size? Will
such extended conditionalities be consistent with Article 301 of the Constitution?
Ans:
No
Article 301 (Freedom of Trade Commerce & Intercourse) States Subject to the other
II
provisions of this part, trade, commerce and intercourse through out the territories of India
is free". Thus this Article talks of Internal Trade and not what is being discussed.
As far as TRIMS is concerned, it does not significantly constrain the ability of governments
of developing countries to regulate foreign direct investment in their territory. (It may be
worth noting that, as Kirmani argues, the practice demonstrates that the application of
TRIMs by countries is discretionary. Kirmani notes that TRIMs may often 'not be binding
insofar as they require a course of action that the firm could otherwise pursue.' (Naheed
. Kirmani, et.aL, International Trade Policies: The Uruguay Round and Beyond, vol. 1/:
Background Papers (Washington: International Monetary Fund, 19.94), p. 13.)
7.9 What additional steps should betaken to protect small retailers? Should an
exclusive legal and regulatory framework be established to protect their interests? Is 8
Shopping Mall Requtetion Act required? Does this require intervention at national level or
should this be left to the States?
Ans:
Provide them financial support, as is being currently done for the MSME sector, in the
form of bank funds etc to strengthen them. The small retailers can be encouraged to form
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into a cluster or major group with in the area and leap forward Into big retailing in the;
nearby towns.
7.10 The present public distribution system provides a valuable safety net to vulnerable
sections of society. To ensure that the integrity of the PDS system is not weakened and
buffer stock is maintained at the desired level, should Govemmentreserve the right of
first procurement for a part of the season or put in place a mechanism to collect a
certain
amount of levy from private traders in case the level of buffer stockfaJls below a certain
level?""
In the context of the rising inflation for essential food products, it is necessary to
strengthen the existing PDS system. TheAPMCs have to be strengthened further for
this
purpose and also give PPP facility to build back-end infrastructure so as to avoid
wastages and losses in the case of essential and perishable commodities.
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