FDI in multibrand retail may ease inflation pressure, says Subir Gokarn

KOLKATA: Reserve Bank of India deputy governor Subir Gokarn said allowing foreign direct investment in multibrand retail is likely to have a positive impact in inflation management.

"We have been quite positive on the prospects of FDI in retail," Gokarn said Friday.

Rise in food prices has been on of the primary reasons behind the persistent high inflation in India.

Gokarn said FDI may help in improving production and in reducing cost of distribution. Majority of Lok Sabha and Rajya Sabha members have voted for 51% FDI in multibrand retail.

India's headline inflation, based on the wholesale price index, rose 7.45% in October, the slowest rise in the last nine months. RBI governor D Subbarao Thursday said the inflation is still high.

The pressure on rupee has also contributed to inflation, especially through its impact on imports like crude oil. The rupee has become weak in the last one month with ebbing dollar supply in the absence of follow up reform measures.

"It (impact of rupee depreciation) is not something we refuse to acknowledge," Gokarn said, adding: "We hope that things stabilise in both domestic and global fronts and rupee finds some stability."
Allowing FDI is expected to attract more dollar inflows into the country and help the rupee gain from the current level of 54.35 against the dollar.