The Hindu : Business : World Bank favours FDI in retailing

Online edition of India's National Newspaper
Wednesday, Apr 13, 2005

Business

Business

World Bank favours FDI in retailing

By Our Special Correspondent

NEW DELHI, APRIL 12. The World Bank today expressed itself in favour of opening up of the retail sector to foreign direct investment to help India integrate with the global economy. With FDI inflows set to rise to $5.3 billion this year, liberalising the retail sector would make easier availability of products.

The bank's Director, Development Prospects Group, Uri Dadush, said the retail sector in India today was a case of low core sector both domestically and internationally.

Speaking at the the India launch of the Global Development Finance report, he said the World Bank did not consider FDI as a primary investment source and could not see any trade-off between FDI and reserves. On the level of the country's foreign exchange reserves, he said it was sufficient to meet 14 months' imports as against the standard norm of six months.

The report says net FDI inflows into developing countries totalled $165.5 billion, while the outflows rose to an estimated $40 billion in 2004. The concentration of FDI flows remained high in the five emerging economies — China, Brazil, Mexico, Russia and India — accounting for 60 per cent of FDI and 88 per cent of the increase. On the reserves, the report said a sizable portion of it was invested in U.S. Treasury Bills, indicating the growing stake of developing countries in the functioning and health of the global financial system.

Mr. Dadush, however, pointed out to the threats to the global economy due to rising current account deficit of the U.S., which could lead to rising interest rates internationally. Besides, he said global imbalances were putting pressure on the dollar and the low U.S. interest rates had contributed to dollar weakness. Unless global imbalances were resolved, he felt the investors could expect further dollar depreciation and rise in interest rates, which would slow growth in developing countries and deteriorate the balancesheet of both low and middle-income countries.

Printer friendly page
Send this article to Friends by E-Mail

Business