Parliament panel says no to FDI in retail

Published: Friday 31 July 2009

Economic survey ignores the recommendation

a parliamentary committee has recommended a complete ban on foreign direct investment (fdi) in retail trade in grocery and food products. The committee has also opposed entry of Indian corporate houses in retailing and sale of their products in malls.

The report tabled in the Rajya Sabha on June 8 said pricing tactics adopted by retail chains would lead to job losses and force small stores out of business (an estimated 200 million people may lose jobs). Global and corporate retail chains would dictate wholesale and retail prices and this would lead to unfair practices, the report said while recommending a policy to re-employ those rendered jobless by the retail chains.

India's pre-budget economic survey 2008-09, tabled in Parliament on July 2, ignored this report and recommended foreign investment in food retailing to boost economy.The Congress-led upa government had sidestepped the issue till last year due to pressure from allies.

Practices adopted by big retail companies is not environmentally sustainable, the report said. The farms leased by the retailers to grow food use excess pesticides. The malls where their products are sold occupy land and guzzle power and water. The committee suggested urban planning regulations to prevent growth of malls. The committee also objected to further licences for cash and carry operations in retail trade to foreign retailers or joint venture of foreign retailers with Indian partners. It said cash and carry operations, where wholesale outlets offer goods at a cheaper price than retail outlets, are a camouflage for direct retailing.

A spokesperson for Bharti Walmart joint venture refuted this and said current regulations do not allow multi-brand retail. Organized and unorganized retail can co-exist. They cater to different segments of society, he added.

Devender Sharma, a food policy analyst in Delhi, said organized retailing would affect farmers. "This has been the experience the world-over," he said. If big farmers in Europe or North America cannot survive, there is little chance that poor farmers in India with small land holdings will, Sharma said. A Confederation of Indian Industry spokesperson said farmers would benefit as middlemen will get eliminated.

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