New Delhi: A parliamentary panel has proposed a blanket ban on foreign direct investment (FDI) in retail. The parliamentary standing committee on commerce also opposed the entry of large Indian companies in retailing of grocery, fruits and vegetables, or using malls to sell these products.
The panel said such modern retailing would lead to job losses and force small stores out of business. Organized retailers account for just around 5% of India’s $350 billion retailing sector.
The report was tabled in the Rajya Sabha on Monday.
“The committee...recommend that a blanket ban should be imposed on domestic corporate heavyweights and foreign retailers from entering into retail trade in grocery, fruits and vegetables,” said the report titled Foreign and Domestic Investment in Retail Sector.
Top executives of India’s two largest retailers—Future Group’s chief executive officer Kishore Biyani and Shoppers Stop’s managing director B.S. Nagesh—declined comment.
“Government should stop issuing further licenses for ‘cash and carry’ either to the transnational retailers or to a combination of transnational retailers and the Indian partner, as it is a mere camouflage for doing retail through back door,” the report said. Cash and carry stores cater to the wholesale trade.
The standing committee was chaired by former human resource development minister and Bharatiya Janata Party leader Murli Manohar Joshi. It included 40 other representatives from various political parties from both Houses. The committee’s suggestions are laid before Parliament for debate but are not binding on the government. The panel said opening up of FDI in retail will result in “unemployment due to slide-down of indigenous retail traders”.
However, a spokesperson of Bharti Wal-Mart Pvt. Ltd, a joint venture between Bharti Enterprises and Wal-Mart Stores Inc., dismissed the report as a mere “recommendation”. “Retail can be an engine of growth not just in urban India but also in tier II and tier III towns offering more job opportunities and helping families to save money so they can live better, and FDI in retail can only help accelerate this process,” said Arti Singh, vice-president, Bharti Wal-Mart.
This parliamentary panel’s report counters that of a New Delhi think tank that was hired by the commerce ministry in 2007 to map the impact of organized retail on mom-and-pop stores. The Indian Council for Research on International Economic Relations had in a report presented in May last year, said small retailers and vendors will be hard hit by big stores initially, but that they will find ways to innovate to try and stay in business.