FDI in retail would have limited impact: C Rangarajan

KOLKATA: FDI in retail would have a limited impact on small retailers, Chairman of PM's Economic Advisory Council C Rangarajan today said.

The impact would be limited because the presence of large retailers would be restricted to metropolitan towns, he said at an interactive session organised by MCC Chamber of Commerce here.

Replying to a query, Rangarajan said in the US too small retailers had not disappeared.

"The small retailers have a locational advantage and would act more business-like under the shadow of the large ones," he said.

Even now domestic large corporate houses were not prohibited from entering the retail sector.

The only difference was in case of FDI, the ownership would become different.

About the fear of Chinese goods flooding the Indian market through foreign retailers, he said it was unfounded.

"Chinese goods are coming to India through trade even now," he added.

Talking about food subsidy, he said that full subsidy to food is of "paramount' importance for countries like India.

"The target of the government as a part of fiscal consolidation exercise is to bring down subsidies as a percentage of GDP. But providing complete food subsidy is of paramount importance for countries like India," he said.

For this purpose, other subsidies would have to be pruned like those on petroleum products and diesel which the government had done recently, he said speaking at an interactive session at the MCC Chamber of Commerce and Industry.

Rangarajan said the government had laid down the road map for fiscal consolidation as both higher fiscal deficit and current account deficit (CAD) deters capital flows.

The former RBI governor said taming inflation by the right balance of monetary and fiscal policies was also important at the moment and the government was tackling the issue with extreme seriousness.

Rangarajan said rating agencies should take note of the various measures being taken by the government.

According to him, growth rate had slowed down but not to the extent which other countries had experienced.

"A nation which has a stable taxation regime and reforms process is on the move," he said.

Going by economic trends, Rangarajan said growth would be between 5.5 per cent to six per cent in the current fiscal and CAD would be between 3.5 per cent to 3.6 per cent of GDP .

The trends also point out that capital flows would be adequate to finance CAD and rupee would not depreciate further and stay at current levels, he added.