New Delhi, Apr 20 (KNN) Amidst debate over the impact of allowing global multi-brand retailers like Walmart and Tesco on the Indian neighbourhood kirana stores, a Parliamentary Committee is looking comprehensively into the impact of the controversial decision on the Indian micro, small and medium enterprises (MSMEs).

In this context, the Parliamentary Standing Committee on Industry has invited suggestions and comments from individuals and NGOs on the issue with a view to examining the issue. “Department-related Parliamentary Standing Committee on Industry, headed by Mr Tiruchi Siva, MP, Rajya Sabha, is presently examining the ‘Impact of foreign direct investment in retail on MSME sector’ for detailed examination and review, the Rajya Sabha secretariat said in a public notice.  It said, the views and suggestions from the public would be treated as confidential and would not be circulated or published.

The Central Government had formally notified allowing 51 per cent FDI to multi-brand retail and 100 per cent FDI in single brand retailers like Nike, Adidas.  In both the cases, a conditionality had been provided for sourcing at least 30 per cent from the Indian MSMEs. The sourcing condition in the case of single brand becomes applicable only if the foreign equity exceeds 51 per cent, while for multi-brand the overseas investment has been capped at 51 per cent.

While the Centre has notified the decision on multi-brand retail, no big chain has so far approached the government for permission. The hesitation on the part of global retailers stems from the fact that several non-Congress ruled states have said they would not allow them to open stores. The retailing is a state subject.   

Further, the Union Budget 2013-14 had proposed that non-tax benefits enjoyed by MSMEs – units with less than USD 1 million investments in plant and machinery – will stay with them for up to three years after they grow out of the category in which they obtained the benefit.

This meant that foreign investors in multi-brand retail, who were supposed to mandatorily source 30 per cent of their inputs from local MSMEs were allowed to continue sourcing from their vendors long after they cease to be in the small sector category.

However, both single brand retailers like furniture giant Ikea and big multi-brand retailers have reportedly conveyed their concern over the sourcing clause to the government. The issue has been taken with Commerce and Industry Minister Anand Sharma.  

Retailing in India accounted for 14-15 per cent of its GDP and its size is estimated to be USD 550 billion.  In addition, India’s retail industry employed about 40 million people.
Further, according to Indian Staffing Federation, FDI in retail would create four million direct jobs and almost five six million indirect jobs within a span of 10 years.

But the move has been welcomed in several quarters who argue that it would provide an enabling policy and regulatory environment. They argue that entry of global giants into the Indian market would help improvement in management skills and human resources; access to finance; technology capability – building and adaptation. 

However, according to critics, the entry of FDI in retail will displace the neighbourhood kirana shops.  The government has argued that foreign direct investment (FDI) in the multi-brand retail segment will create a win-win situation for all the stakeholders.  (KNN)