Finance minister P Chidambaram has hinted at opening up of the retail sector to foreign direct investment after addressing concerns of all stakeholders.

"In course of time, their fears will be allayed and it is only a matter of time before the policy is tweaked to allow FDI in retail," finance minister P Chidambaram said during an interaction with students of Wharton School of the University of Pennsylvania.

Mr Chidambaram's statement comes even as big domestic retailers like Reliance are facing stiff protest from the small players. Reliance was forced to close stores at many of the centres across the country in the last week.

Opposition to the opening up of $ 330-billion retail sector has come from various political quarters, and more vehemently from the key UPA ally, the Left parties. In fact, even Congress president Sonia Gandhi had expressed reservations against opening up of the sector.

The finance minister added, "We will patiently educate them (mom-and-pop store owners) before they accept retail chains. This (opening retail to FDI) will take a little time."

The government allows 100% foreign direct investment in cash-and-carry and wholesale operations and 51% in single-brand retail. It may be noted that some multinational players like Wal-Mart, who had for long waited for the sector to be opened up, have since joined hands with domestic companies as their cash-and-carry partners.

Commerce and industry minister Kamal Nath said the government will ensure there are no job losses in the retail sector. He, however, acknowledged that the issue of foreign direct investment in the retail sector is a contentious issue and it was the duty of the government to ensure that there are no job losses due to the entry of foreign players.

"FDI in retail is a contentious issue. A huge workforce is employed in the unorganised retail sector, and the government has to ensure that FDI does not result in displacement of employment. However, it's not just about FDI. The real issue is big-versus-small retail," the minister said in New York.

He said the country needed the logistic and supply chain expertise that companies such as Wal-Mart possessed. "Wal-Mart has come to India for carrying out wholesale or B2B operations. I think it will find the B2B opportunity in India is bigger than the retail opportunity in many countries. India is also a big sourcing destination for Wal-Mart," he said.

India Inc needs an investment of $ 492 billion in the infrastructure sector between now and 2012 to sustain and achieve a 9% GDP growth in the 11th five year plan, out of which about $ 240 billion would have to be raised through debt, Planning Commission deputy chairman Montek Singh Ahluwalia said.

The catch is: while on a "business as usual" basis, India will attract infrastructure investment worth $ 280 billion in this period, almost $ 240 billion will have to be raised in the form of debt. Moreover, this money will have to be raised in the form of debt with the private sector's debt mobilization requirements being $ 100 billion, he said.

For this, India will have to create a strong debt market, liberalise lending norms, and undertake financial sector reforms.

"We don't have a strong debt market and financial sector reforms have been delayed," admitted Mr Ahluwalia. According to Planning Commission estimates, $ 252 billion could be raised through equity, internal accruals, and budgetary allocations. Earlier, Mr Ahluwalia said the $ 492 billion investment projection was made on the basis of the investment in the infrastructure sector rising from the current level of 5% of GDP to 9% in 2007-12.

According to the commission, around 70% of these investments should come from the public sector while the remaining 30% will have to come from the private sector.

The $ 492-billion infrastructure investment projection represents a significant increase over the estimated $ 200 billion, invested in the 10th Five Year Plan. However, Mr Ahluwalia said that given the current mechanism of funding in the sector, there is a huge gap of around $ 39 billion.

The government may open the retail sector to foreign investment after convincing stakeholders like small shop owners that their setups are not at threat from big players. "In course of time, their fears will be allayed and it is only a matter of time before the policy is tweaked to allow FDI in retail," Finance Minister P Chidambaram said during an interaction with students of Wharton School of the University of Pennsylvania here, reports ET. Mr Chidambaram’s statement comes even as large domestic retail chains are facing opposition from mom-and-pop stores in some states.

Opposition to the opening up of $ 330-billion retail sector has come from various political quarters, and more vehemently from the key UPA ally, the Left parties. In fact, even Congress president Sonia Gandhi had expressed reservations against opening up of the sector. "Experience tells us (organised) retail does not drive them (small retailers) out. They will reorganise themselves and thrive. However, there is genuine fear that has to be allayed," Mr Chidambaram said.

The finance minister added, “We will patiently educate them (mom-and-pop store owners) before they accept retail chains. This (opening retail to FDI) will take a little time."

The government allows 100% foreign direct investment in cash-and-carry and wholesale operations and 51% in single-brand retail. It may be noted that some multinational players like Wal-Mart, who had for long waited for the sector to be opened up, have since joined hands with domestic companies as their cash-and-carry partners.

India has been ranked World No, 1 in the AT Kearney Global Retail Index, 2006, and according to industry estimates, the organized and unorganized retail market will grow to $ 427 billion by 2010 and $ 637 billion by 2015.

"Competition is driving growth in many other sectors: steel, textiles, pharmaceuticals, automobiles, home appliances, packaged food, computer hardware and software, banking and insurance. It is axiomatic that more openness and more competition will benefit the sectors that remain closed or restricted as a matter of policy, and that is the direction in which we would like to move," he said speaking at the Peterson Institute.

India’s manufacturing and services sectors face increasing competition from overseas manufacturers and service providers. Far from being overawed or vanquished, Indian business has boldly ventured into other countries and has opened offices abroad, acquired factories and established new facilities, he pointed. "Foreign direct investment has become a two-way street. In 2006-07. While foreign direct investment flows into India were $ 19.5 billion, the outflow of capital amounted to $ 11.9 billion," he said.

Noting the India story is now well known, he said the outlook for the medium term remained extremely positive. "We believe it is possible to sustain the factors that are driving economic growth and consolidate the gains," he said. India’s GDP has been growing, on average, at the rate of 8.6% since 2003-04. In particular, 2006-07 was a splendid year that returned a growth rate of 9.4%.

He said corporate balance sheets were now much larger and corporate profits higher, giving Indian businesses the financial muscle to take on new challenges. "Valuations have soared, enabling companies to raise large amounts of equity capital," he said driving home the point on India growth story.

However, he said inflation, particularly in food articles, was a concern. "3.32 % is perfectly acceptable, tolerable. But one component of WPI, primary articles’ inflation, was 7.5%. Within primary articles, food is 5.8%. This is a worrying inflation," he said.