PM to work for FDI in retail

Manmohan sees Left coming round in 4-5 months.

Prime Minister Manmohan Singh has expressed the hope that he will eventually manage to convince his coalition partners to allow foreign participation in India's retail trade, while conceding that coalition politics posed limitations in the way of economic reforms.

However, he said, he hoped to carry his "political colleagues" along. "A politician before he can become statesman has to remain in office for long enough," the prime minister said in an interview on August 16 to Rajat K Gupta, a director in the Stamford office of management consultancy firm McKinsey & Co. The interview appears in The McKinsey Quarterly 2005 special edition: Fulfiling India's promise.

"With regard to retail trade, I am convinced that we can work out a package that is fair, that entry of foreign enterprises into the retail trade will not hurt our small shopkeepers but will create a lot more employment. We have to carry our conviction with our political colleagues. I am convinced that over a period of time, we can do that.

"But for the time being, I have my task cut out to carry conviction with our political colleagues that this is a way to move our economy to a higher growth path, to create new employment opportunities, that this is not a strategy to hurt the small shopkeepers in our country. So I have my task cut out. In the next four or five months, I propose to engage myself in the task," he said.

Singh admitted that the "extreme rigidities" in India's labour market were not consistent with the country's goals. He, however, said coalition politics had limitations.

"We don't have a broadbased consensus in our coalition for me to assert that I can move forward in a big way... It is my task to carry conviction to our Left colleagues in Delhi. I haven't given up, and I am confident that when all things are considered, I think the reform will have a more broadbased support."

Pointing out that the Left Front government in West Bengal appreciated the need for labour market flexibility and was moving in the areas of privatisation, the prime minister said the Left parties had to be convinced that what was good for West Bengal was also good for the country. "I haven't given up hope.

I have full confidence in the patriotism of our Left colleagues to believe that in the final analysis of what is good for India, they will also be on board."

The Prime Minister said he planned to identify areas where India needed a big thrust forward and set up a mechanism to bring about "convergence" in what the state governments did and what the Centre did so as to maintain a sustained and fast pace of development.

Identifying steel as a major sector, he said the mechanism would consist of a group of "dedicated officers" to work together to ensure that the country's three-tier system of government did not become a bottleneck in development.

The Prime Minister conceded that India was not quite where it ought to be. He said the next 5 to 10 years were crucial to stimulate economic growth and ensure that the accelerated growth benefited the poorest segment of society.

Stating that the country needed a sustained growth of 7 to 8 per cent over the next 10 to 15 years, the Prime Minister said, "We underpin that growth by strong performance of our agriculture, strong performance of our physical and social infrastructure."

Singh said India needed a lot more foreign direct investment. "We may not be able to reach where the Chinese are today, but there is no reason why we should not think big about the role of foreign direct investment, particularly in the areas relating to infrastructure, where our needs for investment are very large," he said.