FOREIGN DIRECT INVESTMENT
(FDI) IN RETAILS
On Thursday (24th. November 2011)
India threw open its USD 450 billion
retail market to global supermarket giants (Multi Brands and Single
Brands) by approving its biggest reform
in years that may boost sorely needed investment in Asia's third-largest economy.
This was necessary also for economic growth and taming inflation. In fact, this
was long overdue..
It is really unfortunate that our people are not benefiting from what the
country has in store or what its farmer produce. We are the second largest producer
of fruit and vegetable in the world. We produce 195 million tonnes of
vegetables and 45 million tonnes of fruits.
But since we do not have adequate infrastructure
and cold storage chains, fifty per cent
of farm produce is lost in the open space. Recently, it was discovered that due
inavailability of sufficient storage facility in the country, at least twenty
five per cent of food grains are stored in the open space and are either
pilfered or destroyed in the rain. For this reason, we are at present unable to address the post
harvest losses.
The farmer does not get adequate return on what
he produces as whole of his produce does not reach the market. Moreover, there
are ample evidences that when you pay Rs.20/- for vegetable in market, the
farmer does not get even Rs. 4/- for same quantity of his produce. The
middlemen eat up the difference in price as the small farmer at remote place
does not have resource to take the produce to the market . Today, the situation in the country has
come to such a stage that the farmer
literally bleeds while the input cost is rising.
The Government has finally
approved 51% FDI in Multi-brand retail and 100% FDI in Single brand retail. So,
in next few months, we expect some popular foreign stores and brands at our doorstep.
These foreign Brands will be allowed to open stores in Towns / Cities having
population of not less than 10 lacs. At present India has 8000 towns and Cities.
These foreign chains of Multi / single brand can
also bring in numerous logistical benefits and capital in terms of upgrading infrastructure, building chain of
cold storages and it would eliminate layers of middlemen.
Many Economists in India believes that the biggest beneficiary would be the small
farmers who will be able to improve their productivity and realization by
selling directly to large organized players and therefore dis-intermediate the
current value chain.
The farmers will be able to increase their output
and will also get better rewards in terms of realization by supplying directly
to organized players and assured market for their products by tying up
long-term contracts with them.
It will give good prices to farmers and make it
affordable for consumers, ease out supply side constraints. It will have a
substantial positive impact on inflation. It will help farmers by smoothening
out the volatility in the prices of farm producers.
This move is expected to substantially benefit
consumers also by making available farm produce at much lower prices. This
would also lead to growth, evolution and innovation in the un-organised retail
sector.
This move is expected to substantially benefit
consumers also by making available farm produce at much lower prices. This
would also lead to growth, evolution and innovation in the un-organised retail
sector.
This move is expected to substantially benefit
consumers also by making available farm produce at much lower prices. This
would also lead to growth, evolution and innovation in the un-organised retail
sector.
The Indian economists and corporates believe that
this move will make way for inflow of knowledge from international experts
which can give boost to the overall growth of the industry. Raising of
Capability and Financial investments are extremely important for the industrial
growth..
The small retailer, kirana store, mom and pop
stores need not worry as they
also, under the policy framework, can
buy goods at a discounted wholesale price from the cash and carry points.
The expected growth of investment in
infrastructure from the retail players will ensure that the farming community
will have a new support group with a common interest which is expected to give
a great push to productivity.
The single
brand foreign stores will be asked to develop their requirements in India and
produce their goods from the materials in local markets. They will be given
limited options to import their goods produced abroad as 50 to 60 per cent duty
would be levied on import.
In fact, the Indian Small Scale industry will
also be benefited as under the policy, 30 % of Foreign Stores’ requirements
will be sourced from them and thus jobs will be created in this sector.
By conservative
estimates, more than 40 lacs jobs will be created only by putting in place the
supply chains and infrastructure and
another 50 lacs in logistics and small scale sector. The number may go up with
the passage of time.
The expected growth of investment in
infrastructure from the retail players will ensure that the farming and small
scale industrial community will have a
new support group with a common interest which is expected to give a great push
to productivity.
At present, many Indian companies are operating
super markets for last six-seven years in vegetables, apparel and durable
goods, but due to lack of funding and expertise and also opposition from small
vendors in certain states, these large stores have not been able to make much
impact and headway in their operations.
According to Reserve Bank chief - D.
Subbarao foreign direct investment in
multi-brand retail is important for India's overall economic growth and
in controlling inflation. WALMART, CARREFOUR, TESCO, IKEA, etc. are all interested in establishing their business in India as they find huge market in this country
