Nay FDI in Retail

FDIThe business calculations given by the economists and industrialists may sound good. But the goverment should stick to it stand that FDI in retail should not be allowed. In the high mass population like India, small retail should be allowed to continue for the social survival.

The Times of India editorial writes (22 June 2009)

Among 30 emerging markets, India has become the number one hotspot for global retailers for the fourth time in five years. Global consulting firm A
T Kearney’s eighth Annual Global Retail Development Index (GRDI) ranks India first in terms of attractiveness as a retail destination, followed by Russia and China. India wrested back the top honours from Vietnam, thanks to factors like low inflation and a fall in rents especially in tier-2 and tier-3 cities. Since GDRI is geared to helping retailers take investment decisions on the basis of criteria like economic and political risks, the report also suggests a broader interest in the Indian economy.

In a recession-hit world, Asian giants like India are being viewed as key to a global recovery. India continues to notch impressive quarterly growth rates. Its domestic demand-driven economy has a competitive edge over export-led economies. It has a growing and brand-conscious middle class, along with an expanding luxury goods clientele. All this has been water off the back of a parliamentary standing committee that’s asked for a ban on retail FDI. The panel also objects to large domestic corporates doing business related to grocery, fruits and vegetables. Foreign-Indian partnerships, seen as allowing ‘outsiders’ backdoor entry, are opposed. The old bogeys are raised: the supposed death of mandis and corner shops as well as job loss.

The fact is that Indian firms not only survived the challenge of foreign specialty retail, they became more competitive. Nor did the shops around the corner of unorganised retail die out. Big retailers, foreign or domestic, are wrongly projected as bad for farmers or consumers. Supermarket chains can augment farmers’ earnings many times over through direct purchase of their produce. Today, it’s middlemen who gain at the cost of farmers and consumers. Moreover, post-harvest infrastructure in India related to warehousing and processing operations needs improving. Thanks to poor cold chain management and distribution networks, an estimated 40 per cent of the country’s fruits and vegetables get wasted annually. So, in both farm and rural non-farm sectors, the need for increased investment can hardly be overstated.

Go-native arguments make little sense in the face of global interest in setting up shop in India. If anything, India’s $400 billion retail industry is underdeveloped, with organised retail comprising only 5 per cent of the market. Given the Manmohan Singh-led government seems to recognise the need for big-ticket private investment, the retail roadmap should include further liberalisation in single brand retail as well as opening up to foreign multi-brand retail. Mom ‘n’ pop stores coexist with malls and supermarkets the world over. Why should it be any different for India?

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