The much-talked about FDI in multi-brand retail would come into effect in a “phased” manner, beginning from the metropolitan cities, the Economic Survey 2011-12 said today.
“This (FDI in multi-brand retail) could begin in a phased manner in the metros, with the cap at a lower level, coupled with incentivising the existing ‘mom-and-pop’ stores (kirana stores) to modernise and compete effectively with the retail shops, foreign or domestic,” the survey said.
It said that allowing foreign direct investment in multi-brand retail is one of the major issues in the services sector, but the move would address problems relating to food inflation, low prices realised by farmers and investment gaps in post-harvest infrastructure for agricultural produce.
In November last year, the Cabinet allowed 51 per cent FDI in multi-brand retail and 100 per cent FDI in single-brand retail.
Following widespread opposition, including from its own allies, the Government suspended its decision to allow 51 per cent FDI in multi-brand retail.
While the decision on FDI in the multi-brand sector has been suspended, the Government has gone ahead with increasing the foreign investment level in single-brand retail to 100 per cent from the earlier 51 per cent.
“While agricultural marketing could improve immensely with the growth of modern retail trade, the revenue to the Government could also increase as at present the retail sector is largely unorganised and has low-tax compliance,” it said.