Retail FDI can help tame inflation, says RBI

The Reserve Bank on Tuesday said that it believes FDI in multi-brand retail will bring down inflation and expressed its readiness to discuss any contrary view.

"The understanding is that it (FDI in multi-brand retail) will bring down inflation. Logically it will bring down ...

but if there are contrarian views we will discuss them," RBI Governor D Subbarao said in the customary post-policy press conference here.

Last Thursday, a committee of secretaries recommended 51 per cent FDI in multi-brand retail. A final view on this will be taken by the Cabinet. Already 100 per cent FDI is allowed in single-brand retail.

Proponents of FDI in retail, which will pave the way for the entry of global chains like Wal-Mart into the country, have earlier expressed a view that the professional expertise and the wiping out of middlemen would help improve supply side management, which in turn, will help cool price pressure on food articles.

Subbarao said that inflow of longer term capital through the route will also help tide over issues regarding the current account deficit.

"If FDI comes in through that route, that is good in terms of financing current account deficit," Subbarao said, but added that "we have to closely monitor the end-use of the proposed 51 per cent direct capital investment by interested parties in the back-end operations."

Opposition parties have been vehemently objecting to allowing FDI in multi-brand retail, saying it will kill the mom-and-pop shops in the neighbourhood and render hundreds of thousands unemployed.