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LATEST NEWS UPDATES | FDI in retail: More jobs in store for rural youth by Shruti Choudhury & Amiti Sen

FDI in retail: More jobs in store for rural youth by Shruti Choudhury & Amiti Sen

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published Published on Dec 2, 2011   modified Modified on Dec 2, 2011

Foreign retailers may have to reserve at least half of their jobs in superstores for rural youth and source more than the mandated 30% from micro and small industries as the government tries to salvage the big ticket but controversial economic reform. 

An official said the government is likely to have a relook at a proposal that seeks to reserve at least 50% of jobs in foreign-owned superstores for those who have migrated to cities from villages. This proposal was earlier looked at by the committee of secretaries but later dumped. 

The government could also consider raising the limit of 30% mandatory sourcing of inputs from small industry to placate lobbies in the small and medium sector that say it is not enough to protect the interests of traders. "The government is mulling strategies to appease various political parties opposing FDI in multi-brand retail. It is open to negotiations on the various clauses that were recommended earlier by the Committee of Secretaries in June this year but were not included in the cabinet note," the official said. 

Small industry has been defined as units that have invested up to 5 crore in plant and machinery. 

The government, which has been criticised for not carrying out any credible study on how large retail houses would impact employment in the country, could take up the labour ministry's proposal that such a study be made a part of the initial proposal by foreign investors. 

Last Thursday, the Cabinet allowed 51% FDI in multi-brand retail and raised the limit for single brand to 100% from 51%. 

Under pressure from political parties, the government on Monday said foreign retailers must source 30% of their inputs from domestic micro and small enterprises, backtracking from "anywhere in the world" announced earlier. 

"This shows that the policy is not full and final and many other clauses can be brought in to mollify the strong negative reactions coming from all quarters," the official said. 

However, labour economists say an open-ended employment policy will face several constraints given that urban labour supply operates through various channels of informal markets. "Given that identification is a real problem in India, how will they define rural youth? Moreover, it is difficult for the rural population to work in cities, hence we may see a situation where these 50% seats wont get filled by rural youth, thereby ultimately benefiting urban laborers," said Arup Mitra, professor, Institute of Economic Growth. 

"If the employment is contract based, then again its benefits to rural employment is questionable," he added. Defending the government's move, commerce and industry minister Anand Sharma had said that foreign direct investment in retail will help create 10 million jobs over the next three years. 

A discussion paper on allowing FDI in multi-brand retail, floated by the DIPP on July 6, 2010, too, talked about keeping aside 50% of jobs in retail outlets for rural youth.


The Economic Times, 1 December, 2011, http://economictimes.indiatimes.com/news/news-by-industry/jobs/fdi-in-retail-more-jobs-in-store-for-rural-youth/articleshow/10939091.cms


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