Davos: In a clear message to global retail giants like Walmart, Tesco and Carrfoure, the Indian government on Sunday said it will not rush into allowing FDI into politically sensitive multi-brand retail sector.
“Until a decision is formally taken to allow foreign direct investment (FDI) in front-end multi-brand, the big chains can come to India and build up infrastructure and integrate (with) the (small) retailers,” Department of Industrial Policy and Promotion (DIPP) secretary R P Singh said at the sidelines of the annual World Economic Forum.
An arm of the industry ministry, the DIPP is responsible for FDI related matters.
On Saturday, India’s commerce and industry minister Anand Sharma had asked the global retail chains like Wal-Mart and Tesco to invest in the back-end infrastructure.
“Multi brand can only come when the back-end infrastructure is created, that is where the farmer will get the remunerative prices at the door step,” Sharma has said.
Pointing out that the FDI in multibrand retail alone cannot solve India’s supply chain problem, Singh said, “We need end-to-end solutions starting with procurement at farm gate to final consumer. We need to carry crops from peak season to off season both through cold chains as well as food processing.”
On India’s concerns on opening the sector for big foreign players, the secretary said the sector, which is primarily dominated by small retailers in India, is the largest employment provider in the unorganised segment after agriculture.
The sector employing over about 33 million people is dominated by mom-and-pop stores.
“(The) right model for India, therefore, will have to be big chain taking care of a whole infrastructure from procurement to processing as well as transport logistics,” he added.
In July 2010, the Indian government had floated a discussion paper on liberalising the politically-sensitive multi-brand retail.
The minister has also said that investors need to devise India-specific model and replicate.
While FDI in multi-brand retail is prohibited in India, FDI upto 51% is permitted in single brand retail.
Pointing that India was losing agri products, fruits and vegetables to the tune of Rs 1 trillion annually, the discussion paper had said that establishment of cold chains and back-end infrastructure could cut down the losses by more than half.
As per the Indian Planning Commission, infrastructure for the farm sector such as cold chain would need an investment of Rs 64,312 crore.