India unlikely to allow FDI in multibrand retail: official

I / Stockholm September 17, 2009, 14:46 IST

India is unlikely to allow foreign investment in multibrand retail at least in the next couple of years, a top industry ministry official said.

"It's a sensitive sector. I don't see it happening... Certainly not in one or two years," Department of Industrial Policy and Promotion Joint Secretary Gopal Krishna said during his interaction with Swedish industry captains.     

India does not allow foreign investment in multi-brand retail, although it does permit 51 per cent foreign direct investment (FDI) in single brand segment.     

World's biggest furniture retailer IKEA of Sweden recently dropped its $1 billion investment plan to set up single-brand retail outlets in India after New Delhi showed no inclination to allow FDI beyond 51 per cent in that segment.     

"Retail is the second largest employer in India and there is a fear that opening up the sector for foreign direct investment will bring in extreme form of competition and the fears are not unfounded," Krishna said.     

Commerce and Industry Minister Anand Sharma along with officials from his ministry were in the Nordic country for a two-day visit. They were accompanied by Indian industrialists led by the Confederation of Indian Industry.

"We have no social security net," he argued. However, he said 90 per cent of sectors are open including the entire manufacturing sector with the exception of defence. DIPP is the nodal point for FDI guidelines. A Parliamentary Standing Committee has recommended a blanket ban on foreign investment in retail and has opposed even big domestic  corporate entering the sector saying that it will lead to unemployment.     

The committee, headed by Murli Manohar Joshi, feels that "opening of FDI in retail trade by allowing single brand foreign firms in India will result in unemployment due to slide-down of indigenous retail traders". 

Further, Krishna said the insurance bill which awaits the report of the Parliament Standing Committee is likely to be taken up by the government in the next six months. The bill aims to raise the FDI cap to 49 from 26 per cent.

Besides, he is hopeful that the RBI will relook into the roadmap for the private foreign banks, which was put on hold, charting out their entry and revisiting many restrictions such as acquisition and opening new branches.