Date:15/07/2005 URL: http://www.thehindubusinessline.com/2005/07/15/stories/2005071501520400.htm

Back ICRIER makes a case for opening up of retail sector

Our Bureau

New Delhi , July 14

THE Indian Council for Research on International Economic Relations (ICRIER) has suggested phased opening-up of the retail industry, with 49 per cent foreign direct investment allowed initially.

In a report it released jointly with the Department of Consumer Affairs, ICRIER said it "strongly advocates that FDI should be allowed in retailing since it would speed up the growth of organised formats."

The council has said that since foreign retailers are allowed to enter the Indian market through other routes, the existing ban on FDI "has not acted as an entry restriction. On the contrary, the country is losing foreign investment while the entry process has become non-transparent and complicated. India is the only major country which has still not allowed FDI in retailing."

Recommending a gradual opening up of the sector, the council has said that domestic retailers should be given enough time to adjust to changes before the sector is opened up completely, within three to five years.

While making a case for opening up of retail, ICRIER also said that the Government needs to grant industry status to the sector to allow easy access to credit. It also emphasised streamlining of licence clearances, quality standards for local production and imports besides recommending that the Government specify products in the retail of which FDI should not be allowed, such as weapons.

The council also suggested that unilateral liberalisation should precede multilateral commitments in retail as India has received requests from major trading partners in the WTO to allow FDI and this would increase India's bargaining power in the WTO.

The study, which was based on a survey of 391 respondents, highlights that retailing in other countries had increased the speed of development of modern formats, reduced capital constraints of domestic retailers, led to inflow of improved productivity, efficiency and global competitiveness of the retail sector.

It improved quality of employment, enhanced sourcing by global retailers and encouraged investment in supply chains besides assuring consumers of better product quality and better services.