Organised retailers were elated today after the Economic Survey prescribed allowing FDI in multi-format organised retail sector.
"It is a welcome suggestion and will help the Indian retail sector grow, by leading to inflow of money from overseas brands," Future Group Chief Executive Officer Kishore Biyani told PTI.
He said that more Foreign Direct Investment (FDI) will ensure a bigger playing field and sustained competition, resulting in reduction of prices for the consumer.
"The government should also fix a certain minimum threshold for FDI in the multi-brand segment," Biyani said.
The Economic Survey has suggested opening up the multi-brand retail to FDI, beginning with the food segment.
India does not allow FDI in multi-brand retailing, while in single-brand retailing there is a 51 per cent limit on FDI.
Global consultancy KPMG said the government needs to strengthen the Agriculture Produce Marketing Committee (APMC) to facilitate FDI in food multi-brand retailing.
"APMC has not being rolled out in all the states. There are currently many intermediaries between the producers and the consumers in the food market and APMCs could prove valuable for international food retailers and Indian farmers," KPMG Advisory Services Manager Anand Ramanathan said.
When asked about increased competition in multi-brand retailing, in case FDI is allowed, Ramanathan said: "If large Indian organised retail players can exist, then why not foreign brands. The sector will become more competitive."
RPG Group's retail subsidiary Spencer's Retail has also welcomed the Survey's recommendation.
"We view it in favourable light. There is enough room in the Indian retail sector for everybody to grow and FDI will bring about competitiveness between Indian and foreign players," a Spencer's Retail spokesperson said.
According to Indian Council of Research in International Economic Relations (ICRIER), the Indian retail industry was worth 309 billion dollars in 2006-07 and is expected to reach 496 billion dollars by 2011-12.
However, experts say that it is second to only agriculture in terms of inefficiencies in utilizing the factors of production such as land, labour and capital.
The Economic Survey's recommendations come less than a month after the Parliamentary Standing Committee on Commerce had submitted a report recommending a "blanket ban" on entry of domestic and foreign corporates into retail trade.
