'FDI in retail on regional basis can aid exports'

Commerce dept study contradicts anti-FDI lobby.

A three-year-long survey commissioned by the department of commerce on the impact of foreign direct investment (FDI) on exports has said opening the retail business to foreign players on a regional basis would help India's exports.

The study, conducted by the Delhi-based Academy of Business Studies (ABS) and World Trade Centre (WTC), Mumbai, analysed 10,000 FDI approvals between 1997 and 2004 and the operations of all Fortune 500 companies in India and China.

The findings of the interim report, which the department has accepted, contradict suggestions from some political lobbies, notably the Left, that opening the retail sector to global retailers would harm the country's interests, wiping out the livelihood of small retailers and impacting farmer returns. The final report is expected in September.

The interim report, which was submitted in mid-July, comes at a time when the commerce ministry has asked the Indian Council for Research on International Economic Relations (Icrier) to expand the base for its study on the impact of organised retail on small neighbourhood stores.

The Icrier study's interim findings, which were also submitted last month, said organised retail was not harming the country's farmers and was unlikely to adversely impact small stores.

The commerce ministry had asked Icrier to conduct the study following a demand from Congress President Sonia Gandhi, who expressed concern about the country's farmers and small retailers as a result of large domestic houses like Reliance and Bharti and global majors entering the organised retail business.

The ABS-WTC report has recommended opening the retail sector on a regional basis, saying India is a country with local tastes and demand. It has also suggested that the best strategy for foreign investors in Indian retail would be to develop the supply chain by training farmers, fishermen and sheep rearers.

The report also observed that multi-brand stores are the most successful form of retailing in India and that the franchisee model has not been successful. FDI in retailing is currently allowed only for single-brand outlets. Among the other main features of the report are inclusion of a separate chapter on outsourcing and a recommendation to reorient export policies to promote consumer goods.