Panel seeks regulatory body for FDI in multi-brand retail

24 Jul '13

2 min read

The Parliamentary Standing Committee on Industry has suggested the Indian Government to set up a regulatory body to address the problems, including possible joblessness, due to its foreign direct investment (FDI) policy in multi-brand retail trading.

Speaking to reporters, Tiruchi Siva, chairman of the committee, said, “We have recommended a regulatory authority to look into the problem (impact of FDI in multi-brand retail on MSMEs).”

According to Mr. Siva, if the entry of multi-brand retail chains in India is not regulated properly, it will impact the micro, small and medium enterprises (MSMEs), farmers and small markets (called ‘mandis’ in India).

The entry of global retail chains would lead to elimination of ‘mandis’, which would enable foreign retail giants to manipulate prices, forcing farmers to sell their produce at lower prices or prices dictated by multi-brand retailers, according to the report of the standing committee.

With the entry of global retailers, local small and medium-sized retail entrepreneurs and all those associated with the retail trade would become jobless, adding to the already existing social and economic woes, Mr. Siva said.

If multi-brand retail chains are regulated through creation of a ‘Retail Regulatory Authority’, it would ensure that customers are not fleeced and farmers are not under paid for their produce, he added.

The committee also took serious note of the implementation of sourcing norms, and suggested that the minimum 30 percent sourcing from local SMEs should be made applicable item-wise.

The report also suggests that the Ministry of MSME should undertake a survey to find out the gains and losses of previous FDI policies on the MSME sector and to ascertain whether they have resulted in creation of any back-end infrastructure, imparted skills to local workforce or upgraded managerial skills, as is being envisaged in the current FDI policy.

Since the Government of India approved up to 51 percent FDI in multi-brand retailing in September last year, no global retailer has so far set up stores in India through the FDI route.

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