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FDI in multi-brand retail to be a political decision: DIPP

The issue is considered politically sensitive as over 90% of India's retail trade is in the unorganised sector — with kirana shops employing as many as 33 million people

A decision on foreign direct investment (FDI) in multi-brand retail would be taken by the political leadership of the country, according to R P Singh, secretary in the Department of Industrial Policy and Promotion (DIPP), reports PTI.

"Finally, the call has to be taken by the political leadership," he said, adding that his department is a "little guarded" because of "genuine concerns expressed" in the 5th July concept paper.

Unlike defence, where DIPP had suggested 74% FDI, it had left the issue of overseas investment caps open for debate in multi-brand retail.

Expressing hope that a decision would be taken by October, Mr Singh said, "We would like to take the views of stakeholders. I am trying to find a solution, which we think is optimal."

The issue is considered politically sensitive as over 90% of India's retail trade is in the unorganised sector — with kirana shops employing as many as 33 million people.

FDI is allowed only in single brand retail to the extent of 51%, while 100% is permitted in the cash-and-carry (wholesale) business. Domestic organised industry players are of the opinion that the sector should be opened up to foreign investment.

Single brand retail is mostly in sportswear and luxury brands.

Meanwhile, commerce and industry minister Anand Sharma is trying to allay concerns of possible job losses. "I definitely won't agree that there will be loss of jobs due to FDI," Mr Sharma had said in Singapore recently.

Bharti Group chief Sunil Mittal, who supported the move, opined that mere cash-and-carry was not enough. "Until we have end-to-end possibility, it won't work," Mr Mittal said. His group has a joint venture in the cash-and-carry segment with global giant Wal-Mart.

If allowed, global retailers like Wal-Mart, Tesco, Carrefour and Metro would be free to open front-end outlets for selling an array of products.

Mr Singh said that his department is sure India would be benefitted if overseas investment was allowed in defence production. This was the reason for the department proposing a high FDI cap of 74% in the sector, he said, adding that even 100% would be desirable.

However, the issue becomes more sensitive when it comes to retail, he said.

"In defence, we were 100% sure that it will be a win-win situation, and it means nothing but good for the country's gross domestic product (GDP) and manufacturing sector...as far as multi-brand retail, there are some concerns," he said.

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