Dissatisfied govt returns retail study

Move could delay FDI liberalisation in the sector.

Dissatisfied with the findings in an interim report, the commerce ministry has asked the Indian Council of Research in International Economic Relations (Icrier) to enlarge the sample size for its study on the impact of organised retail on neighbourhood mom-n-pop (or kirana) stores.

The interim study reportedly said organised retail was not harming the country's farmers and was unlikely to drastically hurt kirana stores.

The commerce ministry reportedly wants the study to be more broad-based so that the huge kirana sector is covered in greater detail. Icrier, which made the presentation in mid-July, has been granted a four-week extension to complete its study, which should now be completed later this month or by September.

Although enlarging the sample size is cited as the official reason, the commerce ministry is said to be seeking an extension in view of the adverse domestic political climate to retail FDI, especially given strong opposition from the Left.

This opposition comes against increasing demands from the developed world for opening retailing and banking to foreign investment. Wal-Mart, the world's largest retailer, is currently in talks with Bharti for a tie-up for cash-and-carry and technology support for back-end supply chain systems.

Government sources said the extension of the study was an indication that plans to allow foreign direct investment (FDI) in retail, including 51 per cent FDI in speciality sectors like consumer electronics and sports goods, will be delayed. FDI of 51 per cent is currently allowed only in single-brand outlets.

Icrier had been commissioned in February following Congress President Sonia Gandhi's demand for a study to assess the impact of transnational retailers on kirana shops. Commerce Minister Kamal Nath had then said the Icrier study would cover issues on both FDI and entry of large domestic chains in the retail business.

Initially, Icrier was to conduct the study in 20 cities that already have malls and was to focus on those cities where organised retail is at a nascent stage.

The study also sought details from organised retailers about their investment and employment generation plans. Icrier had involved research organisations Development and Research Services and Technopak (in an advisory role) to conduct the study.