Retail FDI just a matter of time: Chidambaram

Finance minister P Chidambaram said today that India will open up its $330 billion retail market to foreign investors after convincing

Finance minister P Chidambaram said today that India will open up its $330 billion retail market to foreign investors after convincing mom and pop store owners that their jobs are not at threat from big players. “In course of time, their fears will be allayed and it is only a matter of time before the policy is tweaked to allow foreign direct investment (FDI) in retail,” he said during an interaction with students of Wharton School of the University of Pennsylvania here. While political opposition to allowing FDI is well known, there has been a growing opposition from tens of thousands of small retailers, who employ millions of people, to even entry of domestic corporates into the sector.

“Experience tells us (organised) retail does not drive them (small retailers) out. They will reorganise themselves and thrive. But there is genuine fear that has to be allayed,” Chidambaram told students at a packed Dhirubhai Ambani auditorium at the school after delivering the Wharton Leadership Lecture.

Earlier this week, commerce and industry minister Kamal Nath had said that the issue was not about allowing FDI in retail but that of large versus small players. His ministry has asked economic think-tank ICRIER to study the situation and the report is expected in a month.

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Nath’s comments had an unsettling effect on big companies, which have a presence in retail, as only last month some of the corporate-run food stores received orders to shut shop in Uttar Pradesh. The state government, which cited law and order problems for the decision, has appointed its own commission to study the problem, but the report is yet to be tabled.

Food products and groceries make up about 55 per cent of the entire retail market, which has been growing at a compound annual growth rate (CAGR) of 10 per cent over the last five years, according to India Brand Equity Foundation. The finance minister said: “We will patiently educate them (mom and pop store owners) before they accept retail chains.”

India allows 100 per cent FDI in cash-and-carry and wholesale operations, besides 51 per cent FDI in single-brand retail. Some multinational players like Wal-Mart, who had for long waited for the sector to be opened up, have since joined hands with domestic companies as their cash-and-carry partners. “This (opening retail to FDI) will take a little time,” Chidambaram said.