By KR Sudhaman May 27 2011 , New Delhi

Stung by unabated food inflation, an inter-ministerial group on Friday made a formal recommendation to open up multi-brand retail to FDI urgently and revamp Agriculture produce marketing committee law, considered as effective “inflation-busting” measures.

The group headed by chief economic advisor Kaushik Basu has sent its suggestions to Prime minister Manmohan singh and Finance minister Pranab Mukherjee, Busu told reporters he was confident that a decision would be taken on urgent basis in the near future.

"We are taking a clear position on FDI in multi-brand retail for the first time.

Of course, it is a recommendation, not policy," Chief Economic Advisor and IMG Chairman Kaushik Basu said adding China, Malaysia and Indonesia have had “palpable” benefits by opening up multi-brand retail to FDI.

Howver along with FDI in retail, there was need for regulator to ensure that these new corporations do not become monopolistic and charge high prices.

A main cause of Inflation is the yawning gap between farm-gate and retail prices of agri-products and this gap will be reduced considerably as in other countries by opening up organised retail, thereby helping in controlling inflation.

The IMG also favoured formulation of a model Agriculture Produce Marketing

Committee (APMC) law, which could be adopted by the states to remove supply bottlenecks at the local level. "There is a need to revise the AMPC Act to reduce the price gap between farm gate and consumer prices. We need a model act to be adopted by states."

Basu said that FDI in multi-brand retail would also help in narrowing the current account deficit. Attracting more FDI would be useful as it is not volatile like FII flow.

“Correcting the margil between the price that farmers get and price that consumers pay is not going to solve the problem of inflation for all times to come but it can have a sharp desirable effect in the short-run of bringing inflation down in food and increase the efficiency of our food markets. This can be great value to Indian farmers as well as to Indian consumers,” Basu said adding “it is time for India to allow FDI in multi-brand retail.

At present India’s retail continued to be primitive and there was evidence that there are large losses that occur as products pass through the supply chain from farm to the retail customer.

“Because of dated technology and managerial methods used to move products from one part of to another, there is value erosion that occurs all the way. This, in turn, raised the price that consumers have to pay, Basu said adding FDI in retail would also help increasing exports of Indian goods.

To ensure India is not flooded with foreign good with opening up of retail, the existing import duty and restrictions if any would continue, he said.

IMG was set up in last February as Inflation had re-emerged as a major concern.

Besides Basu, the other members of the IMG include Planning Commission Member Secretary Sudha Pillai, Agriculture Secretary P K Basu, Food Secretary B C Gupta, Finance Secretary Sushma Nath, Economic Affair Secretary R Gopalan, Commerce Secretary Rahul Khullar and Chief Statistician T C A Anant.

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