FDI in retail: New policy mooted

India, which is increasingly under pressure from the United States and other countries to open up its retail sector to FDI, on Tuesday mooted a marketing policy for the sector though domestic players opposed any move to allow overseas investments in the retail space.

"There is a need for a marketing policy for the retail sector," commerce ministry's department of industrial policy and promotion secretary Ajay Dua said during a discussion on 'The Indian Retail Industry: David vs Goliath?' at the India Economic Summit in New Delhi.

"If tourism, which contributes only one per cent to the country's GDP can have a marketing policy, then retail sector that accounts for 11 per cent of GDP too should have a policy," he argued.

Indian retail industry employs about 42 million people, second only to agriculture, and has at least 11 million outlets operating across the country.

Dua, however, clarified that no decision had been taken on allowing FDI in the sector so far, though the World Bank, the US and other developed countries have asked India to open the sector.

"The government has still not decided," though it has been studying the experiences of China, Thailand and Malaysia in opening up their respective retail sectors to foreign direct investment, he said.

Overseas retailers like Wal-Mart, JC Penney, Costa Coffee and Dixy Chicken have been eyeing an opportunity to enter the Indian retail market, estimated to be worth over $190 million.

But domestic retail players, including Shoppers Stop CEO B S Nagesh and Pantaloon chief Kishore Biyani opposed any move to open up the sector to foreign competition.

Indian retailers have for long been demanding industry status to the sector before throwing it open for competition.

Biyani has been asking the government to give at least five years to the domestic players to build scale to stand-up to competition.

The highly labour-intensive Indian retail industry is highly defragmented, with only 2 per cent of the trade coming under the organised space.

Not surprisingly, international consultant A T Kearney had earlier this year identified India as the "second most attractive retail destination" from among 30 emerging markets. While estimates on the actual size of retail business varied from study-to-study, all agree that the total size of corporate-owned retail business is expected to touch Rs 35,000 crore (Rs 350 billion) this year from about Rs 15,000 crore (Rs 150 billion) in 1999.

But India's plans to tap foreign capital in the sector is being opposed not only by the stakeholders, but also the Left parties -- the main prop of the Congress-led UPA government -- which contend that such a move would leave about 30 million traders redundant.

No decision on FDI in retail: Govt

Meanwhile, the Lok Sabha was informed on Tuesday that FDI in the retail trade is being discussed among the stakeholders and no decision had been taken in this regard.

"The FDI policy, including new sectors to be opened for FDI, is reviewed on an ongoing basis. The issue of allowing FDI in the retail trade sector is being discussed among the stakeholders and no decision has been taken in this regard," Minister of State for Commerce and Industry E V K S Elangovan said in a written reply.

India's total trade with SAARC increased from $4,816.88 million in 2003-04 to $5,205.57 million in 2004-05 recording an increase of 8.07 per cent, he said. The export of unmanufactured tobacco has increased by 8.0 per cent in terms of quantity and 17 per cent in terms of value in 2004-05.

To another query, he said, a committee had been constituted to deliberate upon the rehabilitation package for the seafood industry.

A financial package had been announced for assistance to Assam government to revive Ashok Paper Mills, the minister said in reply to another query.