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LATEST NEWS UPDATES | Super market news

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published Published on Nov 20, 2011   modified Modified on Nov 20, 2011

-The Indian Express

 

The finance ministry has come to an agreement with the department of industrial policy and promotion about what the government’s policy towards foreign direct investment in retail should look like. This means the retail FDI proposal will be placed before the cabinet soon, and hopefully will be cleared as soon as possible. Currently, only 51 per cent foreign investment is permitted, and only in stores selling a single brand. Under the new regulations that limit will be eliminated, and foreign investment in multi-brand retail will become permissible, too, if with a cap of 51 per cent in turn.

These broad parameters are similar to what a secretary-level committee recommended in July. This is not a delay we can easily afford, both because we need big decisions to shake the sense of policy paralysis that has gripped the Indian economy, as well as because investing in retail infrastructure has become essential. This is one of the few possible levers the government has to tackle persistent inflation. Food inflation continues to be above 10 per cent, and much of the problem lies in outdated and inefficient supply chains. Farmers growing agricultural produce have a tough job getting it to their end-customers in India’s towns, not just because of poor roads, but because of information problems, a lack of cold storage, and haphazard systems. The government has shown itself unable to tackle these problems effectively, and is in any case cash-strapped. Clearly, this requires private sector innovation, efficiency and resources. Thus the need for foreign direct investment — and thus the requirement that at least half of the minimum investment of $100 million by each multi-brand player be in support and logistical infrastructure, such as warehousing, storage and transport.

The cabinet should clear this proposal as soon as it sees it, probably next week. It will also require the UPA to exert itself politically; the Left is of course opposed to the move, but the BJP could do with some convincing. The fear of political opposition, and of being seen as supportive of the private sector, should not slow down good policy any further.

The Indian Express, 19 November, 2011, http://www.indianexpress.com/news/super-market-news/877836/


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