In response to the discussion paper circulated by the Department of Industrial Policy and Promotion (DIPP) on permitting 100 per cent FDI in multi-brand retail, the Consumer Affairs Ministry has disclosed its views through a letter to the Commerce Ministry. While recommending 49% foreign investment in multi-brand retail, the ministry wants enforcement of a law at the state-level to protect small stores from the onslaught of big brands.

The Consumer Affairs Ministry has also put in a recommendation to set aside a significant chunk of investments for the development of back-end infrastructure, logistics and agro-processing, which is the dire need of the hour. To regulate the fiscal and social aspects of the retail sector, the ministry has sought legislation of the National Shopping Mall Regulation Act. This should also allow local stores to become franchises of multi-brand retail stores.

Meanwhile, the discussion on the topic is gaining momentum in the country with clearly demarcated supporters and opponents. The feedbacks received by DIPP till date reveals a huge chasm between the two groups. While the retailers and industry, both domestic and overseas, favor the introduction of FDI in multi-brand retail, the unorganized sector comprising of farmers, traders and shopkeepers are resisting the move with all their might.

At present, India allows 51% FDI in single-brand retailing and 100% FDI in wholesale or cash-and-carry operation. With Indian economy expanding at an amazing rate, backed by the growing domestic consumption, top international retailers are eagerly waiting for the legislation to enter multi-brand retail segment to exploit the opportunity. Global retailers Walmart and Carrefour are leaving no stones unturned to strengthen their case.

The success of Indian economy in bouncing back from global economic slowdown is making it a favorite beneficiary of foreign direct investment (FDI). The UN agency, the United Nations Conference on Trade and Development (UNCTAD) said in a report published on Thursday that India would emerge as the third largest recipient of FDI for the three-year period ending 2012.

The World Investment Report 2010 says that India has entered the club of top-ten FDI-receiving nations in the world in 2009, though the FDI fell by $5.8 billion. While India garnered FDI of around $40.4 billion in 2008, it was only $34.6 billion in 2009. Despite the drop, India climbed to 9^th position in 2009, while it was at 13^th position in 2008. In fact, the FDI flow to the entire South Asian region fell sharply in 2009.

The report predicts a healthy future for India as a FDI-recipient. “If the situation continues to improve, India is likely to be among the most promising investor-home countries in 2010-12 as well as the third highest economy for FDI in 2010-12,” said the report.

However, the report also warns that for India to continue as a top FDI-recipient, it needs to strengthen its environment policies. It says that future FDI flow would be governed by climate change with special focus on low-carbon. To this end, the Indian government should formulate policies that ensure greater environment compatibility, both for transnational companies (TNCs) that are investing in India and Indian companies that are investing abroad.

The report says that the environment-friendly approach is essential for ensuring that TNCs are supporting the transition of developing countries into low-carbon economies. It is also important in ensuring that TNCs do not exploit the less stringent or no emission regulations in developing countries to relocate their carbon-intensive production from those with rigorous regulations.

The central government has invited suggestions from all concerned on the subject of allowing foreign direct investment (FDI) in the multi-brand retail segment. The discussion paper released by the Department of Industrial Policy and Promotion (DIPP) on Tuesday states that allowing FDI in retail will help fund investments in farms and storage chains and reduce prices. This politically sensitive issue has come up for discussion due to paucity of funds in creating back-end infrastructure.

Those favoring the entry of FDI in retail argue that FDI inflow in front-end retail sector is vital for the growth of the country’s agricultural sector and rural infrastructure. Moreover, the massive employment opportunities provided by the capital inflow is immensely helpful in sustaining the economy of the rural segment.

Improvement in farmer income, reining in consumer prices and thereby inflation and elimination of inefficiency in the supply chain structure are some of the advantages pointed out. Prosperity of rural areas and growth in agriculture being two major criteria for the country’s economic well-being, the idea of FDI in retail is finding many takers.

However, detractors are also not in short supply. Spearheaded by the opposition party, BJP, they argue that FDI in retail would displace small vendors resulting in loss of jobs and livelihood. Small-time farmers need to be organized to have any bargaining power. This needs to be addressed, so do other important issues like electricity and surface water.

Union Commerce and Industry Minister Anand Sharma while disclosing his views on the topic said, “We have not released a policy. It is only a debate and we will study the inputs and comments of the stakeholders and then take a sensitive view of the situation. This sector has a potential for tremendous growth and we need to tap that to give a new and dynamic direction to India’s economic growth.”

The discussion paper has clarified that the views expressed in it are that of the department and not the government’s. Stakeholders can submit their comments before month end.

The Maharashtra Government has planned to rope foreign investors to join private sector to provide a much needed booster shot to the closed mills and those undergoing liquidation. All this is being done to give the spinning mill industry in Maharashtra a boost.

Apart from starting new mills, the government has also considering various means to modernize and re-start already shut down mills and those under liquidation by co-operating with the private sector.

Importance would be given to rejuvenate the closed or under liquidation spinning units with a concessional rate of finance. At last count there were 28 such mills in the state.

Textile Minister Mohammed Arif Naseem Khan, said, “The arrangements shall be made with the co-ordination of the Maharashtra Electricity Distribution company for uninterrupted supply of electricity and possibilities shall also be worked out to make financial tie-up in this regard under the prevailing schemes of the centre. For speedy implementation of the erection programme of spinning mills, priorities in credit linked fund allocation shall be made in assessment to the progress in civil work and working spindles.

He added, “The power loom sector in the state requires 1012.38 million kilogram of yarn. The spinning mills under the co—operative sector are just producing 1.20 million kilogram of yarn per annum, which is 10 per cent of the total requirement of yarn by the power loom sector. Thrust would be given on establishing spinning mills in cotton cultivation areas like Vidarbha, Marathwada and North Maharashtra. Contract farming linkage shall be promoted.”

“To promote Ginning, Pressing activities including in existing units mainly in cotton cultivation areas of Northern Maharashtra, Vidarbha and Marathwada, credit-based capital incentive/subsidy including concessions in any area wherever needed, a special measure shall be taken up,” he said.

The Minister also added, “Cotton growing areas of Vidarbha shall be taken up on priority and 100 acre land shall be provided to start the integrated activities by establishing textile parks. The state government is keen to strengthen the handloom sector as well. It plans to tie up with marketing chains like Reliance retail, Big Bazar, Fab India, India bulls, and also rope in National Institute of Fashion technology and Weavers Service Centre into the production activities of the handloom sector.

Khan added, “There are 30,000 handlooms in the state. In the era of competition, these handlooms are finding it difficult to survive.”