World Bank president Robert Zoellick has made a strong pitch for allowing foreign direct investment in the retail sector, saying further opening up of India's retail market would help improve productivity, lead to lower prices and create more jobs.
India currently permits some FDI in single-brand retail, but none in the case of multi-brand retail.
Zoellick also said banning exports of commodities to calm prices is not a sound economic policy, as it sends the wrong signal to domestic farmers and creates uncertainty in the international markets, which then adds to price volatility.
The government has taken several steps including banning onion exports as food inflation shot up to 18.32 per cent in the last week of December, though it moderated slightly in the subsequent week. The government also said export of edible oils, non-basmati rice and pulses would remain banned.
Zoellick, who is in India for a four-day visit, also said banning futures trading in commodities would not solve the problem of high prices, as appropriately constructed futures markets can serve as an important tool for risk management.
"If your prices of food are going up it probably makes less sense to have import barriers or quotas or other things," Zoellick told The Times of India in an interview in the bank's New Delhi office. "As for the retail market, over time it would provide better services, more jobs, lower prices, increased productivity. And so I think trying to continue to open up the economy would be in India's long-term benefit."