The $28-billion organised retail trade in India is awaiting the cabinet nod on 51% foreign direct investment (FDI) in multi-brand retail, based on recommendations made by the committee of secretaries (CoS), but domestic retailers and trade associations are still divided on the issue.

At the India Retail Forum (IRF) 2011 in Mumbai on Wednesday, industry leaders like Future Group, Bharti Walmart, Reliance Retail and Aditya Birla Retail stressed on the importance of FDI in multi-brand retail in order to build scale, reduce supply chain costs and improve efficiency in production.

?Modern retail has created a great base and there are multiple brands in every format,? said Kishore Biyani, founder and group CEO, Future Group. ?Now, we need an impetus which can be provided by foreign capital, that looks at a horizon of 15-20 years. No Indian retailer would look beyond five years.? There is consolidation on the demand side but not much on the manufacturing and supply side. ?With FDI, there will be more investments in back-end and technology,? he added.

Biyani?s views were agreed upon by Raj Jain, MD and CEO, Bharti Walmart. He said, ?Billion dollar investments are required in the supply chain from the farm gate to the factory to the consumer. If FDI is allowed, not only front-end retailers but also foreign suppliers will be interested in India.?

FDI will also benefit smaller producers, suppliers, farmers as well as consumers, believes Ficci secretary general Rajiv Kumar. ?The entire chain, from farm gate to consumer stands to benefit with FDI. Farmers will get more remuneration, while consumers will get better prices for products,? Kumar said.

The need for FDI is also imminent on the exports side, feel some retailers. ?Growth of exports in China was phenomenal after FDI was allowed. Exports in India are muted. Need for international capital is essential for GDP,? said Nikhil Chaturvedi, MD, Provogue.

However, trade bodies like the Federation of Retail Traders Welfare Association (FRTWA) and Confederation of All India Traders (CAIT) strongly opposed the entry of international retailers in the country, citing issues of unemployment for small retailers, traders and kiranas.

?There is no protection for kirana stores and if international retailers are allowed, thousands of smaller retailers will be out of work,? said Viren Shah, president, FRTWA. He was seconded by BC Bhartia, national president, CAIT who said, ?Foreign players will not come because Indian retailers need capital. They will do business at the cost of neighbourhood stores.?

While trade bodies argued that FDI results in unemployment for smaller interest groups, Ficci?s Kumar said, ?With FDI implementation, employment doubled in China and quadrupled in Thailand. Productivity also increased. It will create more jobs in India.?

Meanwhile, industry analysts indicated that opportunities created by 51% FDI in single-brand retail and 100% FDI in wholesale cash-and-carry business haven?t been exploited fully. ?Only R306 crore of foreign funds have come into the Indian retail market since 2006, which is nothing,? says Abheek Singhi, head ? consumer and retail practice, BCG. ?The industry needs to identify whether the need for FDI is driven by capital or capability. The role of state governments will be crucial in the implementation of FDI.?

While stakeholders in the trade debate the issue of FDI in multi-brand retail, industry bodies like CII is hopeful that a concrete decision will be taken by the cabinet in 3-6 months. ?India is on the cusp of a retail revolution. Indian consumers are becoming global in their thinking and shopping preferences. FDI couldn?t come in at a better time,? said Thomas Varghese, chairman of CII National Retail Committee and CEO of Aditya Birla Retail. ?52% Indians are below the age of 30 and lifetime customers can be created out of them. This is the most attractive proposition for those investing in the Indian market.?