November 29, 2011

NDA leaders, stop spreading lies; poor will have to pay more if FDI in retail not allowed

Hundreds of millions of the poorest people in India will have to pay more for staple foods like rice and vegetables if foreign supermarkets are refused permission to open in India, the country's chief economist told a newspaper on Tuesday.

Kaushik Basu, one of Prime Minister Manmohan Singh's close advisers, said allowing supermarket chains like Tesco and Wal-Mart to open their first stores in India would be one of the most effective ways of helping the country deal with food inflation, which stands close to 10%.

"There is a lot of misunderstanding about these changes," he said. "Without them, Indians will just have to get used to paying higher prices for food."

He said lacking infrastructure, poor quality roads and a lack of refrigeration meant that around 40% of Indian fruit and vegetable supplies rotted before reaching consumers and added that more investment in the country's food industry would keep prices down and help the overall economy.

India threw open its $450 billion retail market to global supermarket giants last week, with Food Minister KV Thomas saying the government would allow foreign direct investment of up to 51% in multi-brand retail, as supermarkets are known in India. He also said the government would raise the cap on foreign investment in single-brand retailing to 100% from 51%.

But the government appeared to be backtracking on Monday over the move to allow foreign supermarket giants to enter the country, as political opposition grew over one of the most far-reaching economic reforms in years.