NEW DELHI, JULY 12, 2010: IN a bid to perhaps open up foreign direct Investment (FDI) in multi-brand retailing, which is currently prohibited in India, the Department of Industrial Policy and Promotion has decided to release the Discussion Papers on FDI, and invited suggestions on resolution of various issues relating to this sector by July 31, 2010.

The major concerns on opening up multi-brand retailing are that it is the second largest employer after agriculture and opening up this sector could lead to unfair competition and large scale displacement of persons, who may not find employment in the manufacturing sector that has not been growing fast enough. The Indian organised retail sector is also underdeveloped and needs to consolidate before being opened up to foreign investors.

India has however, permitted FDI, up to 51 per cent, in single brand retailing, which was opened up in 2006. Since then 94 proposals were received of which 57 approvals were given up to May 2010 pertaining to sportswear, luxury goods, apparel, fashion clothing, jewellery, hand bags, lifestyle products covering high end items.

There is a growing view that FDI in the retail trade sector should be welcomed. The mid-term appraisal of the tenth plan recommended FDI in modern retailing as the entry of modern foreign retailers through joint ventures in India would build up backward linkages to sources of supply and help develop a domestic supply chain capable of meeting international standards. The benefits could percolate to the agriculture sector, which needed well-functioning markets to drive growth, employment and economic prosperity in the rural areas of the country. This appraisal report recommended the review of the existing policy to develop a strategy to promote labour intensive manufacturing by the retailers too.