Economic Survey 2011: Allow Phased Opening of FDI in Multi-Brand Retail.

NEW DELHI: The Economic Survey on Friday favoured a phased opening of foreign direct investments in multi-brand retail saying it could help address concerns of consumers and farmers, besides bringing technical know-how.

Even as the debate over FDI continues, the survey said during 2011-12, projects worth Rs 24,143 crore are expected to be completed adding a capacity of 168.6 lakh square feet.

"Permitting FDI in retail in a phased manner beginning with metros and incentivising the existing retail shops to modernise could help address the concerns of farmers and consumers," the Economic Survey 2010-2011 said.

At present India allows 100 per cent FDI in cash and carry wholesale trading, while it is prohibited in multi-brand retail. Up to 51 per cent FDI has been allowed in single-brand retail since 2006.

The survey pointed out that FDI in retail may also help bring in technical know-how to set up efficient supply chains which could act as models of development.

According to it, during April 2006 to March 2010, India witnessed FDI inflows valued at USD 194.69 million in the retail sector, accounting for 0.21 per cent of total FDI inflows in the country during the period. "A total of 94 proposals have been received till May, 2010, of which 57 were approved," the survey said.

Global retail giants such as Wal Mart , Carrefour and Tesco have been pitching for opening FDI in multi-brand retail so that they can tap the immense potential this country offers. Globally, FDI in retail is permitted in countries such as Brazil, Argentina, Singapore, Indonesia, China and Thailand without any limit on equity participation, while Malasiya has equity caps.

The survey said the domestic retail sector is expected to record healthy sales in 2010-11 and grow by 10.2 per cent in 2011-12. The sector's PAT margin is expected to expand over the next three years on account of a faster rise in income vis-a-vis expense.

On new projects, the survey said:"During 2011-12,projects worth Rs 24,143 crore are expected to be completed adding a capacity of 168.6 lakh square feet."

For the year ending March 2011, projects worth Rs 8,281 crore are expected to be completed adding retail space of 115.1 lakh square feet, it added. The survey, however, pointed out limitations in the regulation of the sector due to lack of a national framework.

"In India, retail trade is a state subject. There is no national framework for its regulation and development and states have there own regulations," the survey said, adding at the Central level, only the flow of FDI into the sector is regulated.

Source : economictimes.indiatimes.com