'FDI in retail won't bring inflation down'

Without saying it was opposed to foreign direct investment (FDI) in the retail sector, the main opposition Bharatiya Janata Party (BJP) on Wednesday asked the government to clarify how many new jobs would be created by its moves to open the sector to FDI.

It also warned that if this was the panacea the government was offering to stem inflation, it was barking up the wrong tree.

Employment was at the centre of a short debate that accompanied a question in the Rajya Sabha by BJP leader Ravi Shankar Prasad. In a briefing following his speech in the Lok Sabha, BJP leader Yashwant Sinha clarified the government needed to do much more than merely open retail to curb inflation.

Later in the day, Sinha defined the BJP’s position on the matter. “There is pressure from the US on the government to open the retail sector. Our objective is to ensure supply chains which have been in place for centuries, consisting of a large number of small traders and intermediaries, should not be disrupted. About 40 per cent of total industrial production comes from small and micro industries. They need to be nurtured. Monopolies like Walmart could drive small entities out. We are clear that FDI in retail will not bring inflation down,” he said.

In the Rajya Sabha, Prasad wanted to know which sectors had supported the government initiative and if the government had conducted a survey to review the jobs that had been created by the limited opening of the sector – that is, single brand retail and wholesale cash and carry.

Prasad told the government the world had in front of it the example of Mexico which had allowed FDI in retail. “Retail operations were started in 1986; by 1991, Walmart had entered the country and by 1996 it was the largest organised retailer in the country. In the context of the ongoing consultations by the government, do you intend opening up the retail sector to FDI?”

Without directly answering the question, minister for commerce and industry Anand Sharma said consultations were on. He said, almost 35 million people were employed in the retail sector in the agricultural and non-agricultural sector. Only four per cent of retail in the country was organised; the rest was unorganised.

Sharma said employment was a natural spin-off of allowing investment in retail from foreign investors. Currently, losses due to post-harvest storage conditions were unacceptably high. If these could be prevented, and if agro-processing and food processing opportunities were created, it would create more jobs. He also said there were global studies to show that unorganised retail had become more efficient and competitive after the retail sector in counties like Malaysia and China were opened to FDI.

Nominated member of Parliament B S Mungekar wanted to know whether against the background of 8.5 per cent growth of the Indian economy, the employment generated by the opening of the private retail sector been considered. Nominated Rajya Sabha MP Ashok Ganguly made a passionate appeal for acting, not just thinking, about opening the retail sector. He said there was a vested interest operating in the Indian economy – but no one had quantified the ‘suffering’ interest. All data received from China, Indonesia and Japan pointed to the huge job possibilities in organising retail and creating conditions for investment to flow in.

Sharma said the idea was to get investment in order to create a value chain. He said 100 per cent FDI in back-end retail had had salutary effects. It was important to protect not just the farmer but also traders’ interest.