`Retail FDI is like a laboratory experiment`

'Retail FDI is like a laboratory experiment'

Last Updated: Thu, Dec 20, 2012 05:14 hrs
Workers arrange consumable goods at a grocery store in Lucknow

The detractors of foreign direct investment (FDI) have finally got some backing from an unexpected quarter. Former chief economic advisor of India Kaushik Basu, who is now senior vice-president and chief economist of the World Bank, termed the foreign direct investment (FDI) in retail a "laboratory experimentation", which will have some negative effects. He, however, lauded the move to give autonomy to states in this regard.

When asked whether different states having varied policies on FDI in retail would create a disparity, Basu said, "FDI in retail will be like a laboratory experimentation. I like this policy of giving the autonomy to states in this regard. In the next few years, we will be able to see whether the states that have implemented it are doing good or bad. If they are doing well, those states that were hesitant will join the fray."

He, however, added that although there will be some negative impact of FDI in retail, the positives will be far greater. "Big multi-national companies coming here are not sisters of charity. If you play well, you will gain more. Farmers will do much better, while consumers get small benefits. I believe small producers will be the biggest gainers, as their products will flow to the rest of the world," he said.

Breaking the policy paralysis, the Union Cabinet had cleared 51 per cent FDI in multi-brand retail, 49 per cent investment by foreign airlines in aviation sector, and sale of equity in four public sector undertakings (PSUs) at one go in September.

Early this month, the government was able to sail through the FDI in retail policy in Lok Sabha, following a walk out by the Bahujan Samaj Party and the Samajwadi Party. The Manmohan Singh government had even risked its existence for the policy as Mamata Banerjee-led Trinamool Congress withdrew its support.

When asked about the criticism by the Opposition and Banerjee to the FDI policy, Basu said, "Some scepticism about any policy is worth it."

More from Sify: