FDI in Retailing: Long Overdue

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Concerns about the future of the existing retailers in the country, especially those in the unorganized sector are largely unwarranted. The small-time retailers will still have their business as their target market is completely different from the targeted consumers (probable) of global retail giants like Wal-Mart (if it enters India). The small-time retailers act as next door stores that help in purchasing items of daily usage. However, this is not the case with large organized retailers and, therefore, the local Kirana stores will anyway have their business. A case in point is, China, which has allowed 49% FDI straight away in the retail sector and improved its stand in international trade. As regards the future of unorganized retailing in China, according to a study, allowing FDI did not displace the conventional local retailers but on the contrary, these traditional outlets in China have increased significantly from around 19 lakhs in 1996 to almost 26 lakhs in 2001.

The government should, therefore, go ahead and allow FDI in the retail sector. In fact, it should take a cue from China in this regard. Planning to withhold the decision until the December WTO meeting in Hong Kong, so that the government can use this as a bargaining tool for service sector negotiations, is a good move. Whatever the outcome, the government should allow FDI in retailing, if not today at least tomorrow.

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