FE Editorial : Selling the FDI idea

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The Financial Express: Nov 20 2012, 02:19 IST

As soon as the Cabinet cleared 51% FDI in multi-brand retail in September, it expected a maelstrom of dissent and resistance—especially during the winter session of Parliament. The fact that the government is reportedly considering the creation of an independent regulator to check anti-competitive practices in the retail sector is thus a move to allay fears that big MNCs will come in to Indian markets and dominate them to the detriment of smaller players. The idea for such a regulator—mooted by the Department of Industrial Policy and Promotion—is a good one. Companies like Walmart have considerable clout and though it won’t be easy to compete with kiranas, let alone establish a monopoly, Walmart for one has been accused of anti-competitive actions in the past in various countries. A well-functioning regulator can help ensure this doesn’t happen in India—certainly the plethora of complaints against organised retailers will get a fair hearing.

There are, however, a number of issues to be kept in mind before such a regulator is set up. The first issue is that, as Arvind Singhal, chairman, Technopak Advisors, says, the regulator will have a limited impact because the vast majority of the retail market in India is unorganised. Various studies estimate the size of the Indian retail industry at $470 billion, with organised retail accounting for only 6% of this market. The very definition of ‘unorganised’ is that it doesn’t come under any regulatory norms. Another issue to be taken note of is that, as things stand, states have

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