Fears of job loss on FDI in retail misplaced: Rangarajan

Dr C Rangarajan, chairman of the Prime Minister's Economic Advisory Council (PMEAC) feels the fears of job loss on account of foreign direct investment (FDI) in the retail sector are "misplaced". In fact, he believes the traditional and modern retail system will complement each other.

Last week, the government braved intense political opposition and a nationwide bandh to notify the rules for allowing foreign retailers such as Walmart and Carrefour to set up stores in India. However, the policy says foreign retailers can only open stores in states that have agreed to allow FDI in multi-brand retail. "The above policy is an enabling policy only," said the press note issued by the Department of Industrial Policy & Promotion.

Rangarajan thinks that FDI in retail will boost back-end infrastructure. The modern retail system may also help contain inflation, he says adding “…modern retailers can give better prices to famers and consumers”.

Inflation as measured by India's benchmark wholesale price index rose a higher-than-expected 7.55% in August from a year earlier, mainly driven by higher food prices due to deficient monsoon, data on September 14 showed. RBI left interest rates unchanged on Monday despite big-ticket reforms by the government last week, and said its primary focus remained fighting stubbornly high inflation.

Despite the gloomy scenario Rangarajan is sticking to his prediction of 6.7% GDP growth for FY13. "The current account deficit is seen around 3.5%, while inflation can be expected at 6.5-7% by March". 

Rangarajan says agriculture share in GDP may be better than expected.