Thursday, December 15, 2011

Opinion on Multi Brand Retail FDI in India

Almost every news source has been hitting on the Indian government for the past few days as it came up with 51% FDI in multi brand retail and 100% FDI in single-brand retail, though they come along with riders like 50% of the investment and jobs to the rural areas,30% of the inputs should be sourced from medium and small enterprises and investment in infrastructure but the target segment is restricted to 51 towns with population of more than 10 lakhs. Undoubtedly, the issue brings along serious concerns for the economy, the probable effects would be different for different sections.

For an individual consumer a store like WalMart would be beneficial. On the contrary, it is believed that this would be a negative introduction for the local “kirana” shops as it would displace their customers. It is believed that the high number of population (around 33,100,000)engaged in such stores would suffer a loss but a focus on creating jobs in manufacturing and smaller service sectors to employ the roughly 25 million youth who join the labour force every year would lead to a less severe economic impact of FDI retail.

Instead, Rajesh Shula states that the death knell of the kirana shops and local vendors is exaggerated. Countries like China have Wal-Marts but their retail industry is still flourishing. The policy also has its positive sides as with the introduction of FDI, the storage and warehousing facilities will improve leading to an efficient supply chain and reduction in wastage of grains. With this, many argue that the inflation would be brought under control. With the opening up of FDI norms, this may accelerate land prices and the cost of space in shopping centres bringing opportunities for real estate. This might not be immediate as there are a lot of non-performing retail assets on the market that will be absorbed in the first phase.

To conclude, the policy will be thumbs up if brought along keeping in mind the effected part of the society in the long run. Though the policy would bring along greater competition in the market with greater benefits but these need to be accompanied by other policy changes to make it a successful deal.

Yamini  Agarwal | Guest Editor

3 comments:

  1. Good article, however the impact on our foreign exchange reserves could also be explained.

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  2. The government's stance in safeguarding original retail shops in the face of rampant FDI pouring in, in China and India may have been different...Please elucidate on theis ground!

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  3. The decision of bringing in 51% FDI in multi brand retail is neither correct nor incorrect. It is the political diversity of India which creates a problem in making or proving a decision correct in the long run.

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