UPA has been showing some reformist spunk of late. Even as the Opposition continues intense rabble-rousing over the recently announced deregulation of petrol prices, the government is pushing forward a proposal that will ultimately open up the retail sector to unrestricted FDI. The Department of Industrial Policy and Promotion (DIPP) has prepared a discussion paper that makes a strong case for such liberalisation. First, from the first-end to the back-end, the sector is facing really dynamic challenges as consumer demand is growing and evolving. FDI is a good source of the huge end-to-end funding needed to meet this demand. Second, the paper highlights that logistical shortfalls result in around Rs 1 lakh crore of fruits, vegetables and other perishables going waste every year. More funding will mean better technology and infrastructure, which will mean less wastage. Improved availability will yield better prices, helping tame inflation. Third, the paper suggests that riders like those concerning local sourcing and job reservation for local youth can help alleviate public concerns. Finally, a calibrated approach to retail liberalisation is recommended, which would finally lead to the holy grail of FDI in multi-brand retailing. But no amount of logical argumentation can keep the Opposition from baying for blood, as it has been doing on the fuel front. The question is whether the UPA will hold firm and deliver a reform that study after study has shown is in the best interest of both the Indian consumer and farmer.
What the DIPP paper is saying today is not different from what the Economic Survey 2004-05 said: ?FDI in retail trade can not only organise a significant part of the largely unorganised domestic retailing, but also invite established global retail brands into the Indian market, thereby creating greater outlets for outsourcing and marketing Indian products.? Or from what an exhaustive Icrier study found in 2008: ?Profit realisation for farmers selling directly to organised retailers was 60% higher compared with those selling in the mandi.? As for the price benefits delivered to consumers, these were found to be more beneficial for low-income groups to whom organised retail represented new opportunities to cherry-pick products and avail discounts. No wonder the PM has been suggesting that the vast separation between farm gate and consumer prices gives us fresh incentive to engage in a debate about opening up the retail sector. It?s time though to close the debate and simply open up.