FinMin advisors for bold services reforms

With services contributing around 57 per cent to economic growth, finance ministry advisors have made a case for allowing FDI in the retail sector and selling government equity in public-sector undertakings, including telecom firms BSNL, MTNL and TCIL, to achieve high GDP expansion.

A working paper, authored by Senior Economic Advisor H A C Prasad and Additional Economic Advisor R Sathish, said foreign direct investment (FDI) in retail should be allowed in a phased manner, starting with metros.

While FDI is allowed in single brand product retails with 51 per cent cap, elsewhere FDI is prohibited in this vast sector.

“There is a large unorganised sector with low tax compliance. Along with allowing FDI in retail in a phased way beginning with metros, the existing mom-and-pop shops (kirana shops) could be incentivised to modernise and compete effectively with the retail shops — foreign or domestic,” said the paper, titled ‘Policy for India’s Services Sector’.

Prasad said, since farmers benefitted due to modern retail trade, there was a need for opening this sector as well, which could provide greater market access for India’s exports.