Amid all the uncertainty about which combination of parties will form the next government, one thing seems almost certain on the policy front-foreign direct investment in multi-brand retail will continue to remain a taboo. This, despite the fact that organised (even if domestic) multi-brand retail chains have not been doing really well for the past several months, and most expansion plans are either on hold or moving quite slowly. In contrast, the much-feared destruction of kirana shops or your neighbourhood stores hasn?t happened. It?s also likely that the move of the commerce and industry ministry to change the definition of Indian-owned and controlled companies to allow more FDI in downstream sectors is going to be changed to ensure that no backdoor entry of FDI happens in the restricted sectors.

Against the backdrop of such developments, what should the agenda be for the new government for the retail sector? Gradualism would be a balanced way to move ahead. The aim should be to create a system where the organised and unorganised sectors carve out their niches and happily co-exist?the auto service segment is an ideal example.

The best way to move ahead is to first allow more FDI in areas like single-brand retail where 51% is allowed currently. If, say 100% FDI is allowed in single-brand retail, there won?t be any objections. Further specialised segments like sports, stationery items etc can slowly be allowed to have either 51% or 100% FDI. There won?t be any objections on this front also. One of the reasons why FDI in retail has attracted so much opposition from political groupings is because the sector has been viewed as a single whole while in reality it?s really a sum of different parts. Policy-making should therefore tackle the parts rather than the whole. A comparison with the telecom sector where FDI in manufacturing preceded a 74% in services is an ideal example of a gradual approach.

Once more FDI is injected into single-brand and specialty retail it would be easier for the government to bring about a consensus to allow at least 49% foreign investment in multi-brand retail. That would open the door for more in the future.

rishi.raj@expressindia.com