FDI in Multi-Brand Retail of Food Won't Harm Local Markets: Report

New Delhi: The Centre must consider allowing FDI in multi-brand retail of food and grocery to boost food processing as it is unlikely to pose any threat to local stores because a majority of Indian consumers still buy fruits and veggies from the local markets, a report said.

The current policy already has a provision for allowing 51 per cent foreign direct investment (FDI) in multi-brand retail and the BJP-led NDA government has not yet rolled back the policy decision taken by the previous UPA regime.

The report by Delhi-based think tank Indian Council of Research on International Economic Relations (ICRIER) comes weeks after Food Processing Minister Harsimrat Kaur Badal wrote to the Prime Minister suggesting a "relook" at the country's FDI policy in multi-brand retail in food processing.

"The survey findings show that a majority of Indian consumers prefer to buy fruits and vegetables from the local markets (53.3 per cent) and push carts (18.8 per cent) despite presence of organised retail stores in select metros," ICRIER's Arpita Mukherjee said.

So, allowing FDI multi-brand retail of food and grocery sector will not have any impact on local vendors. "Therefore, the government must explore the possibility of liberalizing FDI in multi-brand retail and ease conditions on foreign investors to improve access to variety of products," she said.

At present, the food and grocery sector is largely non-corporate and there are restrictions on FDI in multi-brand retail. Further, some states do not allow direct sourcing. As a result, global multi-nationals have not shown interest in investing in the food supply chain.

High taxes on processed fruits and vegetables and variations in taxes across states also hinder the processing, she added.

Besides this, the 'Indian Phytonutrient report' which was released on Thursday made several recommendations to address the supply chain barrier of fruits and vegetables in a bid to increase India's daily intake of these fresh farm items to the level of WHO recommended quantity of 400 grams per person.

The survey covered 1,001 respondents in five cities -- NCR region, Delhi, Mumbai, Chennai, Hyderabad and Kolkata -- to learn the consumption of fruits and vegetables in India.

The survey showed that the daily consumption of fruits and vegetables remained low at 280 grams per person despite India being the world's largest producer of these items.

Lifestyle issues, seasonal availability, high cost, inconvenient market location, limited storage capacity at home among others were the reasons for low intake, it said.

To raise the consumption level, ICRIER Director and Chief Executive Rajat Kathuria said, "There is a need to identify gaps in food supply chain infrastructure and focus policy on the creation of the right infrastructure."

Fruits and vegetables should be delisted from APMC so that there is no cess and remove restrictions on inter-state movements of fruits and vegetables, he suggested.