A detailed survey organised by the Birla Institute of Management Technology (BIMTECH) has urged the Government to go slow on its proposal to open up the multi-brand retail sector to foreign direct investment (FDI) as it could affect the unorganised retail sector, though consumers would benefit.
In its research report submitted to the Department of Industrial Promotion and Policy (DIPP), BIMTECH has strongly recommended a breathing space of at least five years to the unorganised retail sector so as to enable this crucial sector to re-orient its strategy and be competent to face competition from foreign investment in multi-brand retail. Otherwise, the crucial unorganised retail sector was likely to suffer onslaught of foreign investment, as experienced by most of the countries, resulting in huge unemployment and social unrest, it warned.
BIMTECH research has also suggested to the Government for setting up of a separate fund for educating retailers in the unorganised sector. The fund could be utilised for training retailers in the unorganised sector during the breathing space of next five years. It would also help them in getting fully geared up to face competition from foreign investors in the multi-brand retail. That would be the right time for entry of FDI in the multi-brand retail, it added.
The research report based on a sample survey of nearly 700 consumers in Delhi and its adjoining townships as well as interaction with experts in the fields of consumer movement, farmers-related issues, traders' association, however, found that consumers would be benefited by entry of FDI in multi-brand retail in terms of availability of better quality products and at competitive prices due to the expected intensity in competition.
However, the report is apprehensive of foreign investors capturing the market through predatory pricing in the initial years and resorting to upward revision of price once the mark-space is occupied, as experienced by most of the countries where internationally known retailers adversely affected the consumers' interests apart from causing damage to the local retailers. In this context, BIMTECH report suggests a strong regulatory mechanism by strengthening competition law.