As per the current regulatory regime in India, Foreign retail trading (except under single-brand product retailing — FDI up to 51 per cent) is prohibited in India. Simply put, products sold by a retailer to the general public should only be of a ‘single-brand’.
India, a place where even today 95% of the retail sector is unorganised and the remaining organised part is driven by few major Indian players like Reliance, Big Bazaar, More, Shoppers Stop, Subhiksha and Spencers who are still struggling to earn profits. So the government is trying to open the gates for foreign players in multi-brand retail so that the economic and social conditions of the country can be improved to some extent. But due to various uncertainties in the benefits claimed by the government, the billion dollar decision is facing much opposition from various people across India.
Now the big question arises: “Will small retailers go out of business?” This question partially got answered when big Indian players jumped into the market providing almost every eatable product under one roof. That time also small retailers protested a lot against the stores but no major impact was seen on their businesses as the growth rate of unorganised sector continued to hold itself at 15% per year and ironically on the other hand the growth rate of the organised retail sector went down from 27% to 15% during the time span of 2005 to 2009.
Now the next major concerns are for the farmers. But it is seen that retailers like Reliance Fresh have setup small pickup points near the villages enabling farmers to save their transportation cost of bringing the crops to the mandis. Farmers are being given tips and techniques for reducing the wastages which makes the process even more beneficial for both retailers and farmers.
Government argument is in favour stating that this will bring huge investments in the retail sector and employment opportunities in agro-processing, sorting, marketing, logistics management and front-end retail. Foreign retail majors will ensure supply chain efficiencies and less food wastages by creating cold storages.
There has been impressive growth in retail and wholesale trade after China approved 100% FDI in retail. Thailand has experienced tremendous growth in the agro-processing industry. In Indonesia, even after several years of emergence of supermarkets, 90% of fresh food and 70% of all food is still controlled by traditional retailers.
While the opposition says that FDI will bring few big giants like Wal-Mart, Seven-Eleven, Tesco, Kroger, Carrefour and they will ensure predatory pricing to create monopoly/oligopoly. This can result in essentials, including food supplies, being controlled by foreign organizations and loss of jobs as well.
Now, there are many questions that are still unanswered and also unpredictable. But this is for sure that if the whole system is regulated properly, FDI or NO FDI will reap good results for all as “knife in the hands of surgeon is good but in the hands of murderer is disastrous”!!
-By Akshay Jain
No comments:
Post a Comment