Do FDI’s in retail good for INDIA ?

[anil nandyala]

 

Government of INDIA has given permission up to 51% FDI in multi branded retail and 100% FDI in Single branded retail and cold storages. but, many parties such as Trinamool ,Bahujan samaj party and others are opposing the move saying that it leads to lose of jobs. before considering this move as good or bad lets look at pros and cons of the situation

 

PROS:

•   Decrease in inflation
•   Inflow of foreign foods
•   Improvement of efficiency in retail chain
•   Reduction in food wastage (25% of the food produced is wasted in india due to lack cold storage)
•  Elimination of middle man between farmers and retailers

 

 

CONS:

 

• Lost of jobs in unorganized retail sector 

 

 

Government has also introduced some rules such as retail shops can be opened only in areas where population is more than 1 million, 30% of the manufactured and processed products should be from small industry and 50% of the investments has to be on back end infrastructure.

 

Many parties are opposing the move saying that it leads to lose of jobs, but actually there will be no lost of jobs because retails increase purchasing power of the consumer, which means money saved by the consumer is invested in other areas that leads to creation of new jobs in other sectors. So FDI in retails actually helps the country by reducing inflation, helping farmers to get better price for their products and reducing food wastage. but other political parties with out knowing the implications are still opposing the move.

 

 

[Varun Tiwari]

I would like elaborate the cons, FDI in retail may create job losses and displacement of traditional supply chain. One of the main features of rural India is disguised unemployment. Farmers, evicted from the agricultural sector, engage in small retail trades for livelihood. The main fear of FDI in retail trade is that it will certainly disrupt the livelihood of the poor people engaged in this trade. The opening of big markets or foreign-sponsored departmental outlets will not necessarily absorb them; rather they may try to establish the monopoly power in the country which could be the matter of great concern.

Best Regars,

Varun

[anil nandyala]

FDI in retail is allowed in only cities with more than one million population that is around 50 cities in india. Farmers will be actually benefit from these because big retails buy directly from farmers by eliminating middle man such that both consumer and supplier will be benefited( for instance as ITC & Reliance fresh buy directly from farmers to reduce the cost of the products ). Some people may lose job in traditional supply chain but it is supplemented by creation of job in other sector because money saved through increased purchasing has to be invested in other. WALMART being the lowest priced retail was not able to create monopoly power because it can only survive if its prices are lower than others. At last the consumer is benefited by retail stores.  

[Gurcharan Singh]

If I am correct it is FDI in retail which includes other sectors as well, keeping agricultural produce and farmers aside, let us see if they are positively affected or not, be it garments, other household products? Moreover how can we too optimistically say that FDI in retail would strike off the middlemen from the process, I guess malls like MORE, Reliance Fresh are there from before, but has it done any good to the farmers? Yes I do accept that by FDI, our economy will be supported, flow of money will take place and all other positive things can take place, but it is too early to comment on elimination of middlemen from the process.( Nice blog Anil good job)

Comments awaited.....

[anil nandyala]

FDI in retails include other sectors as well, but retail generally means food items and other house hold items. I mentioned the prices of goods become cheaper by retails because this is what WALMART has done by reducing the prices of all goods available with them.  As per as my knowledge Reliance fresh buys directly from the farmers thus giving more margins by eliminating middle man. If you have any further doubts about how retails reduce prices of all goods & eliminate middle man between them come to me i will give you the documentary of  " How WALMART does this ?"

[Gurcharan Singh]

So, with your analogy, that would lead to economical availability of the food items through Reliance Fresh and hence Reliance fresh should be progressing faster at least at visible pace, only 3-4 outlets are visible in Kolkata or may be more i am not too sure of the numbers, then what could be the probable reason for Reliance Fresh's failure to grow at the rate they should have grown? no doubt on WALMART but would it be possible in a country like ours is the question? Yes it would do good to the consumers but is it possible at the 1st place?

[Sankha Ghose]

As yesterday's Eco Times said, the Kirana will not die. It thrives on competition, and will find new ways to get a share of the wallet. Further, 30% of the supplies will have to come from domestic SMEs. That can only lead to good. The entry of big multi-nationals will lead to better competition in the market and will compel domestic retail chains like Reliance Fresh, Big Bazaar and More to come up with better ways of conducting business. The only real concern here is the amount of consumption that towns like Pune, Kanpur and Patna will be able to offer. With Indian retail chains opening multiple stores in big towns, how much more can we consume? 

[anil nandyala]

Reliance buys goods economically, but i don't know how their supply chain is ?, it may be one of  the reasons they are not doing well.  where as the foreign players which are trying to enter India are successful because of their supply chain management. looking whether its possible in India or not, we have seen how Kishore Biyani led Future Group has done and how the retail sector is growing in India .

[Gurcharan Singh]

Or may be the share of wallet can turn into a "zero sum game" given the saturation of the demand in the market for the goods? Only time can tell us what does future hold for kirana and for foreign players, but one thing for sure our economy will have positive effects due to this...

 

[anil nandyala]

Finally you got the essence of it.

[Gurcharan Singh]

Mr.Nandyala read my post twice if required I never ever said people won't be better off but what I wanted to harp on was the elimination of middlemen where you seemed to blame the supply chain of Reliance fresh that is it, nothing extra, and when you speak of good for the economy it essentially means good for people and I think I got it on the very outset