There is a raging debate on FDI in retail but, guess what, it's already here - and it has failed big time.

FDI in financial services retail has been here since 1993 and it has been a disaster for the consumer.

Consider this: in 1992 the only mutual funds available to local Indians were run by the Unit Trust of India and a handful of other PSUs like SBI Mutual Fund and Canbank Mutual Fund. At that time UTI alone owned 10% of the value of all listed Indian shares. This means that local Indian investors, via their ownership of the units of UTI, owned 10% of the Indian stock market.

Then, in 1993, we allowed FDI in the retail mutual funds business.

Under the FDI rules, if a foreign fund house wanted to own 100% of the mutual fund business in India, it needed to bring in USD 50 millionas equity in the company. If the foreign fund house wanted to own 76% (but less than 100%), it had to bring in USD 25 million as equity. And, if the foreign fund house wanted to own 51% (but less than 76%), it needed to bring in USD 5 million as equity in the mutual fund business.

Foreign mutual funds dominate, retail presence wilts

The policy was a success.

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