With the issue of allowing 51 per cent foreign direct investment (FDI) in multi-brand retail rocking Parliament on Monday, India Inc was seen speaking in different voices although in support of the issue.
FICCI secretary general, Rajiv Kumar, at a press conference, extended all-out support to the government move while on the other hand Confederation of Indian Industry (CII) called for a calibrated approach in introducing FDI in the retail sector in terms of the percentage and minimum capitalisation requirements.
Mr. Kumar said opening of the retail sector would create big employment opportunities in the country. He said those industry associations which are opposing the foreign direct investment in multi-brand retail have a vested interest. "This is just a fear that has been created for some vested interest. FDI in retail will be a game-changer like telecom. I see only positive impact on employment," he remarked.
However, CII said while it strongly supports the introduction of FDI in multi-brand retail trading, it recommends a calibrated approach for introducing FDI in the retail sector in terms of the percentage and minimum capitalisation requirements.
Some traders' associations are arguing that about 40 million employed in this sector would loose their earnings because of opening of big foreign retail stores. "In fact, foreign stores will generate employment and that will be higher quality employment. Small stores would also increase their employment to compete with the big retailers," he said.
CII said FDI in multi brand retail will give a boost to the organised retail sector, which positively impacts several stakeholders including - producers, workers, employees and consumers and Government and hence, the overall economy. Opening up of FDI can increase organised retail market size to $260 billion by 2020. This would result in an aggregate increase in income of $35-45 billion per year for all producers combined; 3–4 million new direct jobs and around 4–6 million new indirect jobs in the logistics sector, contract labour in the distribution and re-packaging centres, housekeeping and security staff in the stores.
FICCI FDI will bring about the development of a robust supply chain which in turn will integrate farmers and small and medium size enterprises into the modern trade process, resulting in knowledge and skills transfer, ensuring farmers and SMEs receiving higher prices for their produce/supplies, providing a more transparent mechanism for pricing, helping in planning their supplies.
This article has been corrected for a typographical error in the photo-caption
Keywords: FDI in multi-brand retail, foreign investment, retail sector
Well!!!even i think 51% in FDI should be allowed..organised retailing will prove to be much beneficial to millions of indian consumers..as it will provide quality goods at cheaper rates..it will create millions of jobs...it will result in healthy competition among local retailers..in order to stay in market they will also improve their quality and services..and fear of wiping away local retailers is totally baseless..as there is a major portion of population especially in small cities and suburban areas which totally or partially depends on local retailers for their daily needs and will always depend on them even after the introduction of organised retail shops...so A YES to FDI!!!!!
very good discussion guys....awsm..but can anybody tell me exactly what this 51% is?????
I do support the ongoing issue FDI in retail should enter India .
@Dr.C.Murukadas,
I would like to point out that when you said that the entry of new
retailers from outside would create only 0.52 million jobs for people
is only a part of the story. the entry of the new retailers would also
crate new middlemen and thus the need also for transportation,
storage, marketing, etc will also increase manifold. Thus the argument
that the entry of new outside retailers in will create more jobs in
India is not wrong.
The point that the push cart vendors and small time traders benefit
more in large cities than in small towns is absurd. People in rich and
posh areas of a city tend to buy from supermarkets than on road-side
thelas. It is the middle class person in small cities that buys from
small time traders and road side thelas.
the point that retailers like Wal-Mart look for cheapest vendors might
be true, but no one will sell anything to anyone for peanuts just for
the sake of selling. they will factor in a profit margin or at least
1% if not 5% or more.
I think even big malls like Big Bazar, Mantri mall,Garuda mall are wiping out small shops. I wonder why no one is opposing this.
I think the foreign direct investment should be allowed but till the extend which doesn't hinder any small traders..but one thing is for sure every advantage has a disadvantage with in it... todays life is with understanding the need and making the benefits of the customers. If there is FDI investment in retail sector... look at the advantage of income government has.. it would have a retail sector tax accumilating for government... and the better employed employe would be included in income tax regeim if it comes into the category.. why only think of small traders.. there are customers and a huge country depended on trading so do you think every brand will be able to invest every where in india .. not at all. irrespect of the about of investment capital i think india is a vast territory to cover... and our farmers and small traders and our type of buying facility is only provided in better ways.. why losss its alllways a advantage of fdi coming...
I think FDI inestment is okay, if singh's govt can manage details in the deal. FDI (foreign direst investment)in retail stores also brings in FJF (foreign junk food) and cheap junk stuff. Watch movie titled 'Food Inc'.
Pros: Government will get more revenue from sales and employment taxes. This money help government to spend it back in country infrastucture. I think it is well spent, if they invest in rural infra and defence.
Cons: Farmers may or may not get better prices. Small shop owners have to close shops and work for these big box stores.
Multi nationals like walmart and tesco love it, because they can sell their junk manufactured processed junk food (ex: Kraft foods) for dirt cheap prices, still making huge profits. If you go to any big box store in foreign country, you see about 5% of store is fresh food and grains, rest 95% is junk food. This is not good for peoples health. Suddenly we might see people becoming fat, by eating more of this junk, and less of fresh food.
It is good to have FDI in retail stores. It will create good quality products without any adulteration will be distribited by all small merchants because of MNC retail competetion.
I don't understand how government taken so much important decision hurriedly?Why not government consult even congress M.P.State govern met,commercial and industrial organizations before taking decision?.Is government bended before the pressure of America.America pressuring too much from last five year on India.Why not government take in confidence to opposition parties real cause of this unbearable pressure of America?
This government has time and again proved that it is more interested in protecting the interests of MNCs and big business than people.
Walmarts and MCDonalds have virtually decimated small businesses in the US and world over. Even in the US, Walmarts are disallowed in certain parts of the country to protect local economy. Why do you think people in the US are up in arms against wall street and other big businesses? Big business hassuccessfully killed local economies by moving most of the jobs to offshore locations like China.
FDI in retail would have a devastating effect on local micro-economies in India. Most of the goods sold in big retail chains will be sourced from China in effect decimating small and medium industries. Once the competition is killed, there is a virtual monopoly. Moreover, most of the profits will be diverted out of the country and not invested back in to the economy.
Isn't this eerily similar to what EAST INDIA COMPANY did ?
There is nothing wrong in moving forward in this age of development..it sounds very sugary to read..Ohh..now there is going to be 50% FDI !! Its like allowing allowing foreign players to openly flourish in our markets..giving a major setback to the domestic low level retailers and self employed section in this field. I would like to remark a line from this article "new indirect job created as contract labour in the distribution and re-packaging centres, housekeeping and security staff in the stores" ..wao what a job..snatching them of their self business and pushing them to be a security guard and housekeeper ,where hardly they would be paid like 2000k/month or even less who knows.. and the bulk profit will again go to the upper section..so there is a dire need to have a control upon the minimum wage level that employees are paid in this big retail stores in order to have an inclusive growth and let the wealth be distributed among masses.
The caption to the photograph says"Few traders’ associations are arguing ...."
I suspect the newspaper editor or the author means "A few traders' associations are arguing...."
There is a big difference in meaning between "few" and "a few" in the English language. "Few" without the indefinite article has same meaning as "none of the."
Also, "because of opening of" should be preceded by "because of the opening of."
The grammar is atrocious and reflects badly on The Hindu as a newspaper.
1) The argument that taxation is gong to improve is totally baseless . its is the problem with the govt and its procedures and not FDI.
2)wth large players in market the buying power of wal mart will be heavy and they will bargain over producers. i am not sure how thats going to benefit the producers .
3) we have enough indian retails to crater the need for people of india. if wal mart opens million jobs its going to be loss of job for million small buisness man (unless new areas with less density is covered)
4) if government is concerned about middle man let them abolish and provide a better direct sales channel .
I feel like we are experimenting with another east India company .
The steps taken by Govt. to allow 51 % in multi- brand retail will surely help the customer to have better choices at reasonable prices. The move will also enchance the economy growth by creating more job oppurunities for people. However , the move is unpopular within few states . Govt.should make sure that the step is welcome by all states.
There are 100s of case studies, articles and books available (many of them taught in Busines Schools across the world including India) which tell the horrific stories of how Wal Mart ate up other businesses and employment, and the kind of price its supllier paid.
I oppose foreign direct investment in retail. We need FDI when india got independence. At that time we do not have enough fund to provide employment opportunities. Because of FDI during the past we have now attained sustained economic growth. This is the time government should encourage entrepreneurs. Moreover over millions of people in india now involved in retail business. If FDI comes means these local retailers have to compete with foreign retail shop. Some saying that it may help in providing employnment opportunities. If we allow FDI local retailers will incur loss and only way for then is to join in foreign retail outlets. I accept in telecom FDI had made a impact, because telecom is being runned by multimillinears, but retail is being run by middle class people. If people wants all these people to become unemployed u can surely bring FDI.
Wal-Mart has caused so many small businesses in USA to be closed. It has resulted in shipping of so many jobs to China etc. It is a distress to be a supplier of Wal-Mart. Also all the numbers indicating increase in the size of the market ( $$$ ) is misleading. All these benefits do not propagate to common man - it would just make rich more richer. Say no to FDI!!
Government of India's present dicision to permit 51 percent FDI in retail sector is a step further forward to the economic liberalization process initiated by us almost two decades ago. At this stage of our economic growth it is very essential to maintain a steady flow of FDI not only in retail sector alone but in other industrial sectors also. Formulating the guidelines to such massive FDI ventures by our goverment must be competitive and transparent. It should not end up like another 2G spectrum scandal! Indian govenment should control the MNC's and not licensing the MNC's to control the 'taste buds' of every Indian!
You can understand the anxiety about impact of FDI in retail. But I wish to say that political parties’ and others’ opposition to the FDI in retail has to be based on sound logic. Is the welfare of crores of consumers, who far outnumber the small traders, not important? Opposition parties appear to be worried about small retail traders but are actually ignoring the consumers’ interest. This is simply unfair. The market for groceries and other consumables in most of our towns and semi-urban areas is not a perfect market. Many times, the middlemen and the small traders earn unreasonably high profits by not only over-charging the helpless consumers but also by selling sub-standard goods. Consumers in India hope that, with FDI in retail, there will be far more healthy competition in the retail business and as a result all consumers as well as retailers will benefit. Lastly, whatever legal changes are required in regard to marketing of farm produce, the same should be made urgently.
I feel the Goverment should go ahead to open the retail sector to 51percent FDI, this in turn will do more good for our farmers and consumers alike. People employed or own this small shops will not lose there business or jobs, daily to buy a loaf of bread or eggs or vege our population still depends on the local shops. Some political parties is taking undue mileage from this issue.Even at this point our country does not have the capacity to store and distribute food grains, lot of them is rotting in open inturn FDI will improve this.
The examples are numerous, right from the automobile sector to telecom sector, to the IT sector and so on which has changed the face of those sectors and of our nation in the last 150-20 years. Yet the amount of scepticism being shown by the opposition parties is surprising. One wonders at the double standards of the BJP and other opposition parties who are opposing it just for the heck of it.
It is good to hear that India is now sensible enough to open the retail sector to 51 percent FDI. The advantages are numerous. The economy will benefit from this move. Govt will earn more through tax collection. Paying customer who deserve to be treated like king will benefit. All these years Indians yearned for quality goods at fair price. Unscrupulous Indian traders took customer for granted, never pay the supplier promptly, tax evasion and underpayed employees. Time has come to give Indians the chance to enjoy qulaity products which so far enjoyed by those who can go overseas for shopping and purchases. There should be a caveat to source goods from local manufacturers and if only their qulaity is not good should be allowed to import. Remember how MaruthiSuzuki changed the face of Indian automobiles.
As the above news article states, the benefits outweigh the losses and it is clear that well informed and honest people would all support this new FDI policy. Because the silent majority of consumers around the nation are the ones going to benefit from this in the long run. Only people who are profiteering unfairly with the current system and some politiciens with vested interest are ready to oppose with all their might. Let us hope the truth wins in the final!
do We have any problem in Retail chain?
why we need this Retail chain now?
we need water transport and we need free education and we need free medical.So please do those items asap. thx
I have already expressed my views on the Centre's decision to allow 51 % FDI in retail trade in my comment on editorial, “misconceived obsession,” in the Hindu dated 28.11.2011. After a detailed analysis of the pros and corns of allowing 51% FDI in retail trade, I would like to make further clarifications on the demerits of FDI in retail.
1) The most important argument by the government in favour of FDI in retail trade is that it will lead to deceleration of inflation in the country. It is surprising to note that the government headed by a leading economist is pinning its hope on FDI in retail for containing inflation, especially food inflation. Historically there are no evidences to show that foreign investment, especially FDI, has acted as an enabling factor for controlling inflationary pressure. On the contrary, there are ample evidences of foreign investment causing inflationary pressure in many countries, including India. Moreover, the government has not explained how and in what manner FDI in retail trade will lead to fall in prices; and how long the fall in prices, if any, will be sustained. Is there any guarantee that prices will be stabilised and thereby the real income of the people will increase on a long-term basis? Therefore, the contention that it be possible to bring down inflation by allowing FDI in retail has no credibility and validity. In fact, the FDI proposal was initiated long before food inflation became an issue. Thus, unmistakably it has been pushed through because of considerations other than rising prices.
2) The argument that the primary producers are expected to get better prices is unfounded. Experiences show that nowhere in the world have the farmers who supply goods to big retail chains benefitted. It is difficult to understand how they would benefit, when the big retail players like Wal-Mart look for the cheapest possible suppliers. To begin with, they might offer better remuneration, but that would be only until they are able to eliminate traditional channels of supply. Ultimately the farmers will have no choice but to sell to big players -- at any price. This has been the experience of all countries which allowed FDI in multi-brand retailing. A detailed examination of information available on the impact of allowing mutlti-brand global biggies including Wal-Mart, Carrefour and Tesco into countries such as Indonesia, Thailand, Brazil, Canada, Germany, etc., indicates that they will ultimately eliminate competition and will indulge in monopolistic practices.
3) The government's contention that FDI in multi-brand retail will also create 10 million jobs is unfounded and unrealistic. For argument sake, if the decision to allow FDI in multi-band retail become a reality and four or five big retail giants decide to open stores and each one of them set up 20 shops on the average in each of the 53 million plus cities, on the whole 5300 shops will be opened by them. If each of the retail shop employ on the average about 50 persons directly, the 5300 shops put together will employ only 0.26 million persons. And equal number of persons might be employed indirectly. On the whole, around 0.52 million persons will be able to get employment at the best scenario.
4) The retail trade in India is largely unorganised (informal).It accounts for over 40 million jobs and 98 per cent of the total trade. It is informal, with credit traditionally extended on trust and based on an intricate web of relationships. Hundreds of thousands of people who earn their livelihood from the millions of existing retail outlets may be put out of business by the retail biggies. As employment generation in the formal sector in India has been very sluggish in recent years, many unemployed youth all over the country have taken to self-employment, particularly in the retail sector. These informal retail sector establishments are successful, to a certain extent, only in the big cities. In the smaller towns and villages retail units have a precarious existence. These tiny entrepreneurs find it difficult to earn enough income from their business to meet even the bare necessities of life. So, many of them migrate to big cities in search better pastures. But only a small proportion of them become successful after migrating to the city. The tiny entrepreneurs suffer from various bottlenecks, particularly lack of finance. Since the scheduled commercial banks do not come forward to render financial assistance, they are forced to borrow at high rates of interest from private lenders and run the business and earn a meager income. But, most of the tiny units/vendors have regular customers, including upper-middle class and rich people. If FDI is allowed in the retail sector, it will wipe out many of the smaller Indian retailer chains and the small retailers like the small provision shops and the push cart vendors, who thrive largely in the residential areas around upper-middle class and richer sections of the society. These tiny entrepreneurs will not only lose their source of income and livelihood, but also their honour and prestige.
5) Moreover, the majority of consumers, who buy essentials from their neighbourhood stores on credit and pay bills on a monthly basis, will also suffer with the disruption of the traditional system of neighbourhood retail stores.
Therefore, we demand the Congress-led UPA government to reverses the ill-advised move to allow 51 % FDI in retail trade. Dr.C.Murukadas, Chairman, Foundation for Sustainable Development.
What ever India does it must make sure this process does not impact
negatively in Indian Manufacturing and helps China exporting low cost
products to India. All these Foreign Retail Giants have a massive low cost supply Chian from China. India need not enrich China with this FDI policy.
All the benefits of FDI in retails being promoted can be achieved in India with Indian Capital "Walmart" was introduced in USA not by FDI in USA. Target was formed in French not by FDI in French so and so forth. Indian Democratic government should wake up and see what is going on. What will be the price of FDI. What will be the Cost of Foreign Capital?- 30% return on investment? 25%,... 5% how much it will cost Indian Consumers to support that type of Investment Return? Indian Government should not do something just for snob appeal alone. Study the cost benefit and then decide.
FDI in retailing will not help the farmers in the long run. In the beginning, these big organised retailers will buy the products from
farmers and small and medium scale manufactures at higher
rates.After a limit the local shops cannot afford to buy the goods
as the manufactures and farmers are selling their products to big
retail houses at higher rates.within in no time, local shops and
kiranas will be closed down.Retails giants alone will be left in the
scenario. At this point of time, these retailing house decide the
price of farm products and goods.The farmers and the manufactures
have to sell their products at the rates dictated by these retail
majors.These manufactures wont have other platform to sell their
goods.Thus the retail majors will be controlling the economy. Some
may cite that there will be competition between different retailing
houses. But in the era of co-operation of corporations, there can be agreements and arrangements for mutual profit.
I think that it is correct to be concerned about the impact of big
retail chains on the character of Indian life (as anyone familiar with
the impact of Wal-Mart on American towns would be). However, the lack of
cold storage infrastructure is a major issue that has to be addressed
and looking to FDI to help create this necessary infrastructure seems
like a reasonable path so long as the GOI manages it properly. The
proposal as it stands does seem to pay due consideration to the dangers
that letting large retail chains into the country.
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