Date:18/09/2005 URL: http://www.thehindubusinessline.com/2005/09/18/stories/2005091800610500.htm

Back Views mixed over FDI in retail sector

Our Bureau

Kolkata , Sept. 17

INDUSTRY professionals and academics, debating the hot topic of "FDI in retail sector in India" here at an interactive session organised by the Swadesh Research Institute (SRI), have expressed divergent views, with the broad agreement being only on abundant caution before opening up this sector to the Wal-Marts and Carrefours of the world.

While Dr Abhijit Sen, former co-chairman of the Nicco Group and now Honorary Consul for Sri Lanka in Kolkata, said there was empirical proof that FDI in retail will not shrink employment opportunities, going by the US example, Prof Dipankar De of ICFAI Business School, Kolkata, expressed doubts over the actual benefits that may accrue to the nation through FDI in retail.

He cited a report of the UK Competition Commission, which says thousands of retail jobs were lost on the entry of hypermarkets through FDI in retail in the UK.

Quoting the recently released World Investment Report for 2004-05, he said there was a distinct slowdown in investments in retail trade in developed countries. Therefore, why the Wal-Marts and others are eager to come to India, where some domestic investment in retail trade was already beginning to happen?

In India, retail trade in the organised segment was only two per cent, with a whopping 98 per cent being in the unorganised sector, against China's 20 per cent and 80 per cent, respectively, according to Dr D.R. Agarwal, Director, SRI.

The size of India's highly unorganised and individually small retail trade is close to $200 billion, nearly 14 per cent of our GDP, and employs 21 million, which was about seven per cent of our total labour force. This is said to be six times bigger than that in Thailand and five times larger than South Korea and Taiwan. China's retail trade is 8 per cent of GDP and accounts for 6 per cent of total employment.

FDI in retail in India, which has been recommended (to the extent of 49 per cent) by ICRIER, a New Delhi-based policy research group, is under the consideration of the Union Government. The think-tank has suggested that any opening up of FDI in retail should be gradual (3-5 years) to give the domestic industry enough time to adjust to the changes.

According to Dr Sen, some 16 per cent of total employment was in retail trade, which is dominated by the hypermarkets. And this has thrown up huge employment opportunities, he maintained, disputing the assumption that allowing FDI in retail in India will shrink employment. He, however, agreed that such investments will no doubt generate a different kind of employment with varying skill sets.

Dr Agarwal said though India has so far not made any formal commitment under WTO, nor has received any reciprocal market access by other countries, autonomous liberalisation of FDI in retail sector was beyond our WTO obligations.

He said the Government has already taken a stand against commitment in certain areas of services that include wholesale and retail trade in WTO, "and by allowing FDI in retail outside WTO framework, Government may weaken its bargaining position in future negotiations, where they cannot promise less than what they have already allowed".