Basu favors FDI in multi-brand retail to tame inflation

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Saurabh Gupta | 28 May, 2011
FDI (foreign direct investment) in multi-brand retail will help to tame inflation, Chief Economic Adviser, Kaushik Basu said at press conference in New Delhi on Friday.

"We are taking a clear position on FDI in multi-brand retail. Of course, it is a recommendation, not policy", Basu told reporters.

Concerned over rising inflation, the Inter-Ministerial Group (IMG) has favored opening up multi-brand retail sector for foreign investment, suggesting it would reduce price gap and help curb inflationary pressure in the country, said Basu, who is also the chairman of an inter-ministerial group set up to review inflation.

He said, "There is a need to revise the Agriculture Produce Marketing Committee (APMC) Act to reduce the price gap between farm gate and consumer prices. We need a model act to be adopted by states," he added.

India allows up to 51 percent foreign investment in single-brand retail. In multi-brand segment, foreign investment is restricted only in cash-and-carry or wholesale outlets.

Inflation based on wholesale prices was recorded at 8.66 percent in April. Food inflation rose to 8.55 percent during the week ended May 14.

However on the issue of rising prices of global commodity, Basu said, "This year because of changing global scenario and many other important organisations having downgraded India's growth rate, we have decided that we would go back and take another look at our (GDP) numbers in mid-June,"

When asked about his estimates for the GDP growth, Basu said, "There would be some downward correction. My expectation is that it will be a small change".

Finance Minister Pranab Mukherjee had projected 9 percent estimated GDP growth for the 2011-12 financial year in his budget speech.