Academic institution to study aspects of big retail

THOUGH Bharti has emphasised that the joint venture was on and it was in line with government policy, the role of Wal-Mart is not being played up, leading to speculation that the US multinational’s brand name may not be adopted by the JV. The February 12 communication to the DIPP mentions that Mr Singh wants the study to cover other aspects like impact on economic growth, prices, farmers, consumers and manufacturers. “Accordingly, the prime minister has desired that the DIPP may commission a study of the possible impact of large-scale retail operations, either by transnational supermarkets or major Indian business houses, on small-scale retailers and vendors,” says the PMO letter, a copy of which is available with ET. The PMO wants the study to be carried out by a reputed academic institution. “The time-frame for the completion of the study should be reasonable so that it can feed into policy making in the near future,” says the letter. The PMO move may mean that the suspense over Wal-Mart’s collaboration with Bharti may linger for some more time though the current joint venture plan is permitted under the FDI policy. The impact of the study ordered by the PMO on the plans of large domestic retailers is not clear. According to current government policy, nothing prevents domestic players from setting up a retail chain while 100% FDI is allowed in wholesale trade—cash and carry trade. No FDI is allowed in retail stores which sell to the end consumer. The DIPP had sought details from Bharti on the proposed tie-up with Wal-Mart and reported that the plan does not violate current policy. The DIPP letter mainly recounts existing policy on retail. The PMO letter points out that the DIPP’s explanation does not address the question posed by Sonia Gandhi. “After perusal of the comments sent by the DIPP, the prime minister has observed that the AICC president had raised a specific issue in her letter, referring to the need for a careful study of the likely impact of the entry into retail trade of transnational supermarkets on the livelihood security of small-scale retailers and vendors, and that the DIPP has not responded to the issue in its comments,” says the PMO communication. “The terms of reference for the study should include an impact assessment with the possible effects on economic growth, prices, small-scale retailers and vendors, farmers, consumers and manufacturers,” the PMO letter says. Studies in the past had favoured FDI in retail though a section of small retailers has been opposing policy liberalisation. A study by ICRIER, submitted to the Department of Consumer Affairs in 2005, supported gradual opening up of FDI in retail. The benefits to consumers and employment generation for semiskilled population will favour retail FDI, the study had said. Last year, PricewaterhouseCoopers had come out with a study that emphasised on the need for encouraging organised retail. Wal-Mart currently sources $625 million from India while it sources around $9 billion from China, where FDI in retail is permitted and where Wal-Mart has over 50 stores. The current move by the PMO holds tremendous political significance since the Left has also expressed concerns over the fate of small retailers. The impending Assembly elections in Uttar Pradesh are yet another factor. courtesy:economictimes For more on Retail India visit www.retailindia.tv