FDI in retail: India Inc speaks in different voices

FDI in retail: In different voices

With the issue of allowing 51 per cent foreign direct investment (FDI) in multi-brand retail rocking Parliament on Monday, India Inc was seen speaking in different voices although in support of the issue.

FICCI secretary general, Rajiv Kumar, at a press conference, extended all-out support to the government move while on the other hand Confederation of Indian Industry (CII) called for a calibrated approach in introducing FDI in the retail sector in terms of the percentage and minimum capitalisation requirements.

Mr. Kumar said opening of the retail sector would create big employment opportunities in the country. He said those industry associations which are opposing the foreign direct investment in multi-brand retail have a vested interest. "This is just a fear that has been created for some vested interest. FDI in retail will be a game-changer like telecom. I see only positive impact on employment," he remarked.

However, CII said while it strongly supports the introduction of FDI in multi-brand retail trading, it recommends a calibrated approach for introducing FDI in the retail sector in terms of the percentage and minimum capitalisation requirements.

Some traders' associations are arguing that about 40 million employed in this sector would loose their earnings because of opening of big foreign retail stores. "In fact, foreign stores will generate employment and that will be higher quality employment. Small stores would also increase their employment to compete with the big retailers," he said.

CII said FDI in multi brand retail will give a boost to the organised retail sector, which positively impacts several stakeholders including - producers, workers, employees and consumers and Government and hence, the overall economy. Opening up of FDI can increase organised retail market size to $260 billion by 2020. This would result in an aggregate increase in income of $35-45 billion per year for all producers combined; 3–4 million new direct jobs and around 4–6 million new indirect jobs in the logistics sector, contract labour in the distribution and re-packaging centres, housekeeping and security staff in the stores.

FICCI FDI will bring about the development of a robust supply chain which in turn will integrate farmers and small and medium size enterprises into the modern trade process, resulting in knowledge and skills transfer, ensuring farmers and SMEs receiving higher prices for their produce/supplies, providing a more transparent mechanism for pricing, helping in planning their supplies.

Indian banks not facing any stress, says RBI

Amid contradictory ratings by global agencies, the Reserve Bank of India on Friday said the Indian banking sector was not facing any stress, though state-owned lenders need capital infusion.

“Overall, we don't see any fundamental stress on the banking system as a whole. So we are nowhere close to the problem,” RBI Deputy Governor Subir Gokarn told reporters on the sidelines of an Assocham event here.

His comments come within days of ratings firm Moody's downgrading the outlook of the Indian banking system to ‘negative', from ‘stable'. Another rating agency Standard & Poor's, however, upgraded the ranking saying domestic regulations in India are in line with global standards.

“There are of course long-term issues of capital. If the system is growing at 20 per cent a year, it needs the capital to grow at 20 per cent at a year... It is not any indication of systemic threat,” Dr. Gokarn added.

He, however, admitted that there could be some pressure points on the banking system on account of high interest rates.

The capital requirement of PSU banks, including SBI, for the fiscal has been estimated at between Rs.10,000 crore and Rs.20,000 crore. The government has already made a provision to infuse Rs.6,000 crore in public sector banks in the current fiscal.

As regards the increase in non-performing assets (NPAs) of the banking sector, he said, “NPAs are increasing, but it is not dramatic.''

NPAs of state-owned banks have increased to 2.31 per cent of their assets at the end of March, 2011, from 2.27 per cent in the year-ago period.

As at the end of the September quarter, gross NPAs of country's largest lender SBI stood at 4.19 per cent, higher than 3.38 per cent in the year-ago period.