Chief Minister Siddaramaiah’s policy switch on allowing FDI in multi-brand retail has, as expected, left industry divided down the middle. While sections of large industry have generally welcomed the move, small and medium enterprises are deeply worried about the potential consequences of allowing foreign retailers to sell their wares in the State.
Industry lobbies representing big business such as the Confederation of Indian Industry and the Bangalore Chamber of Industry and Commerce (BCIC) have welcomed the State government’s move to overturn the previous government’s move to keep out foreign retailers.
Sandeep Maini, vice-chairman of the Karnataka chapter of the CII, welcomed the move. He said that it would provide a “great platform” for organised retail, which still accounts for a small proportion of retailing activity.
But smaller establishments, which seek shelter under the protective umbrella of bodies such as the Federation of Karnataka Chambers of Commerce and Industry (FKCCI) and the Karnataka Association of Small Scale Industries Association (KASSIA), think otherwise — and very strongly too.
FKCCI president K. Shiva Shanmugam told The Hindu that the move “poses grave risks” to thousands of small establishments, which employ lakhs of people. “Where is the level-playing field for these units when they are asked to compete against foreign retailers?” he asks.
Asked if the policy’s clause prescribing a minimum “local” sourcing level of 30 per cent would not offset the disadvantage, he said: “The point is that the 70 per cent that foreign retailers will source from anywhere in the world would swamp the 30 per cent that is sourced locally.” He also pointed out that the price at which imports come in could potentially ruin Indian small units.
The poor state of infrastructure available to small units also sets them at a disadvantage, Mr. Shiva Shanmugam said. “How can we invest in cold storage facilities when the roads are in such bad shape?” he asks.
“Give us the same facilities that the government gives to foreign investors when it rolls out the red carpet, then we can compete with them,” he argued.
Mr. Shiva Shanmugam said that he raised these issues with the Chief Minister on Thursday. He added, “The Chief Minister has promised us a patient hearing very soon and we remain hopeful.”
The BCIC, on the other hand, has welcomed the move. H.V. Harish, senior vice-president, BCIC, said that the regulations governing FDI in retail “provide enough safeguards” for small units. Although he does not expect investments to flood in, because “India is no longer the place to go for foreign investors”, he hopes India to become “more attractive” to them.
