Govt rules out FDI in retail as titans clash at WEF

New Delhi, Nov 27 (UNI) Not dithering under pressure from India Inc, the UPA Government today stood firm on its stand of not permitting FDI in retail, but reiterated that it was welcome in logistics.

The scene of action was the ongoing India Economic Summit, which saw a clash of industry titans and the government on the issue of opening FDI to retail.

Reliance Industries Ltd Chairman Mukesh Ambani, CMD Bharti Enterprises Sunil Mittal and Mr Adi Godrej, Chairman of the Godrej Group, took issue with Mr Ajay Dua, Secretary, Department of Industrial Promotion and Policy (DIPP) on opening up of the retail sector.

Mr Dua said the reluctance of the government in this regard emanated from protecting employment generated in large numbers by the 'mom and pop stores'. He said entry of large corporates would threaten employment of the 21 million people employed in such stores.

The official argued that the 300 billion retail market was growing at the rapid rate of 15-20 per cent, which would require a gargantuan investment of 30-40 billion dollars in the organised retail sector. This would further grow to 60 billion dollars by 2010.

Nevertheless, there was a huge area of logistics where investments from corporates, including foreign companies, were welcome, Mr Dua said.

Agriculture is an area, which was in dire need of such investments, as a chain of backward and forward linkages would be set in motion.

The panel of industrialists led by Mr Ambani, Mr Mittal and Mr Godrej did not see reason in Mr Dua's argument, saying that the investment requirements of the sector are so huge that some flow of FDI will not upset the Apple cart.

Besides, most of retail continues to be in the unorganised sector where FDI and investment be large domestic companies would be reluctant to move in.

Interestingly, these industrialists are already in the business of retail. While, Mr Godrej is an old hand, Mr Mittal recently forayed into an agri-business and Mr Ambani opened a chain of retail stores in Hyderabad.

Mr Dua said the roost would still be ruled by 'Kirana' stores as the up market for luxury goods was a miniscule 1.2 million households from among a population of one billion, and that too was concentrated in eight metros.

The clamour for the latest was confined to the middle class whose incomes were growing and which numbered about 40 million.

The top of the cream was too small and the government was committed to improving the lot of the man on the street.

The session was titled 'Will there really be a retail revolution?' The proposition in this regard said India is rated as one of the most attractive retail markets. Its size is assessed at 200 billion dollars with a potential of 30 per cent growth over the next five years. Such a market opportunity is too big to be ignored by both national and international players.

The moot question, however, is the manner in which the Indian retail landscape is evolving with the country's growing prosperity.

How have consumers and brands change in the climate of eight per cent growth and retail expansion.

UNI CS/GS PV BST1758