Union commerce minister Kamal Nath (centre) with Ficci secretary-general Amit Mitra (left) and president Habil Khorakiwala in New Delhi on Monday. Picture by Ramakant Kushwaha

New Delhi, Oct. 8: Union minister of commerce and industry Kamal Nath today ruled out foreign direct investment (FDI) in retail.

“A study on retail is underway and the report is still awaited. We have no plans for FDI in retail,” he said at the Ficci India Rural Business summit in New Delhi today.

Nath has asked the Indian Council for Research on International Economic Relations to study the problems faced by small retailers because of the entry of big companies into organised retail. The report is expected in a month.

On integrating rural economy with industry, Nath said, “Industry can partner the panchayats to assess and meet the local requirements of agricultural inputs, fulfil the storage and post-harvest needs, engage in contract farming, encourage direct procurement, market agricultural produce and promote farm processing. Each of these linkages has the potential to spur rural businesses in a major way.”

Union finance minister P. Chidambaram had recently said the government might open the retail sector to foreign investment after convincing small grocers that their shops would not be threatened by big players.

“Experience tells organised retail does not drive small retailers out. They will reorganise themselves and thrive. However, there is a genuine fear that has to be allayed,” Chidambaram had said.

“We will patiently educate them before they accept retail chains. This opening of retail to FDI will take a little time,” he had added.

In Uttar Pradesh, Bengal and Orissa, domestic retail chains have been facing opposition from small grocers. The government had earlier tried to open up direct investment in retail but opposition from the Left scuttled the move.

However, some Congress ministers have indicated that FDI may be allowed into retail at a later date.

The government allows 100 per cent FDI in cash-and-carry and wholesale operations and 51 per cent in single-brand retail. Multinational players such as Wal-Mart, who had long waited for the sector to be opened up, have joined hands with domestic companies as their back-end suppliers.