Sharma writes to all MPs on merits of decision

Last Updated: Fri, Dec 02, 2011 19:30 hrs

Commerce and industry minister Anand Sharma has marshalled his pen to address the opposition parties’ arguments against allowing foreign direct investment (FDI) in the retail sector.

In a five-page note to all Parliament members, he has itemised each of the points made and given the why-it-is-good rationale. On the primary argument, that “the policy will kill small retailers/traders”, the commerce ministry note stresses that the change applied only to cities with a population of more than a million, just 53 in number. In the rest of the country, small retailers will continue as before.

The note says the conditions attached for entry would mean “limited presence of such entities”. At the same time, the very entry, or its prospect, would lead to innovation in supply chain efficiencies, with retailers reinventing themselves. This would benefit the consumer.

Also, it notes, the Competition Commission has powers to deal with any case of predatory pricing if and when it occurs.

As for the charge that Chinese goods would flood the market, the note says this is nonsense; “entry of goods into a market is not a function of FDI policy but of the export-import policy”. Besides, the mandatory 30 per cent sourcing from Indian small scale industries would instead enable small and medium enterprises to integrate with global retail chains and, thus, export their products.

Plus, Sharma says in the note, the safeguard on half the investment having to be made in back-end infrastructure was a “powerful incentive for investors to produce/source products locally, rather than import from outside”. It would make “little economic sense for these retailers to go in for large-scale imports”.

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