Union Budget 2015-16 : Economic Survey makes a case for liberalising FDI in retail

Economic Survey_5

Economic Survey has made a case for liberalising FDI in retail, saying that it would help bridge investment and infrastructure deficits and improve supply chain management. The Survey stated that India remains an attractive destination for long-term retail investment despite the sector facing many challenges in past few years. It highlighted that 58.3 percent of Indian population is below 30 years.

Around 31 percent of this population living in urban areas with rising disposable income makes one of the key positives for the future of the retail sector. Citing AT Kearney’s Global Retail Development Index, the Survey said India’s retail trade ranking slipped to 20th in 2014 from 14th in 2013. It said in view of difficulties in attracting domestic capital for setting up marketing infrastructure, particularly warehousing, cold storages and laboratories, “liberalisation of FDI in retail could create the possibilities for filling in the massive investment and infrastructure deficit which results in supply-chain inefficiencies”.

India needs billions of dollars in logistics development as every year huge amount of vegetables, fruits and foodgrains go waste because of poor and inadequate storage facilities in the country. Interestingly, BJP, in its manifesto, had said that it will keep FDI out of the key sector of multi-brand retail. As per the current policy, 51 percent FDI is allowed in the multi-brand segment while 100 percent is permitted in single brand retail trading.

Both the decisions were taken by the earlier UPA government. Although, the UPA government had allowed FDI in multi’brand retail, only one investment proposal of UK based Tesco was cleared during its regime. Noting the changes taking place in the sector, the Survey said: “Migration from traditional stores to modern retail continues, though the latter accounts for only 8 percent of the total market.”

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