Kaushik Basu favors FDI in multi-brand retail to control inflation

27 May 2011 Evaluate

Concerned over high inflation, Chief Economic Advisor to the finance ministry and Inter-Ministerial Group (IMG) Chairman -- Kaushik Basu has advised opening up of multi-brand retail to foreign investors which could help in taming inflation. Basu said “This will bring more competition in the market and reduce the gap between prices at the farm and retail levels”.

The industry has been for long lobbying for permitting foreign direct investment (FDI) in retail in a phased manner, beginning with metros and incentivizing the existing retail shops to modernize, could help address the concerns of farmers and consumers. Further, FDI in retail may also help bring in technical know-how to set up efficient supply chains which could act as models of development.

Basu also suggested for incorporating changes in agriculture marketing laws to check the rate of price rise and said that IMG favours formulation of a model Agriculture Produce Marketing Committee (APMC) law, which could be adopted by the states to remove supply bottlenecks at the local level. 'There is a need to revise the AMPC Act to reduce the price gap between farm gate and consumer prices. We need a model act to be adopted by states,' he added.

India's retail sector is largely closed to foreign firms and favors small family-run stores, with 51% of FDI allowed only in the single-brand retail sector. Multi-brand retail is restricted to cash-and-carry or wholesale outlets.

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