With deep pockets and international sourcing capabilities, global retail chains will outcompete domestic players, displace jobs, and undermine livelihoods.
In predictable fashion, the Manmohan Singh government chose to ignore voices of opposition and implement its agenda of permitting foreign investment in the retail trade. While Parliament was in session, the Cabinet met to approve the hitherto prohibited foreign direct investment in multi-brand retail, with a cap of 51 per cent on foreign equity that ensures majority ownership. Simultaneously, the cap on foreign equity investment in single-brand retail has been enhanced to 100 per cent, offering sole ownership rights to foreign investors.
Large international retailers are bound to use the opportunity to get a share of the large Indian market. Foreign sales have been an important source of revenue for many of them amounting in 2007 to as much as 74 per cent in the case of Ahold of Netherlands, 52 per cent for Carrefour of France, 53 per cent for Metro of Germany, 22 per cent for Tesco of the United Kingdom and 20 per cent for Walmart of the United States. Walmart's 20 per cent too has to be seen in context: with $379 billion of revenues in 2007, it stood way ahead of Carrefour, which came in second with $123 billion in the global league table for revenues.
Power of the chains
The power of these chains has been amply illustrated in other contexts, where they have been in operation. With deep pockets and international sourcing capabilities, they exploit economies in procurement, storage and distribution to outcompete and displace domestic intermediaries in the supply chain. This occurs not in one or a few centres, since each retail chain tends to establish procurement, warehousing and distribution facilities across regions and cities. Once the smaller middlemen are displaced, we have a few large firms and their agents dealing with a multitude of small, medium and relatively large producers on the one side, and a mass of consumers, on the other.
The relationship with producers is that of an “oligopsony,” with a few buyers and a large number of sellers. With consumers, it is one of an “oligopoly” with few sellers and a large number of buyers. Structurally, this provides the basis for an increase in margins at the expense of prices paid to producers or charged to consumers. The new “middlemen” appropriate these higher margins. That a part of the margin may be shared with the producer or consumer to increase retail volumes and market shares does not take away from the fact that the distribution of power within the supply chain benefits the large intermediary. In the medium term, it is the dominant position of these large players that would influence the size and direction of margins.
Thus, on the production side, the danger is that the prices paid to and returns earned by small suppliers, especially in agriculture, would be depressed because a few oligopolistic buyers dominate the retail trade. Given the precarious viability of crop production even at present, that shift could severely damage livelihoods. On the other hand, once the retail trade is concentrated in a few firms, retail margins themselves could rise, with implications for prices paid by the consumer, especially in years when domestic supply falls short.
Within the supply chain itself, it is to be expected that the players displaced would consist of not only smaller retailers, stretching from kirana stores to street vendors, but also medium and large wholesale dealers who would be rendered irrelevant by the ability of large conglomerates to contract with and procure directly from producers. The immediate and direct effect would be a substantial loss of employment in the small and unorganised retail trade as well as in segments of the wholesale trade displaced by the big retail chains.
The potential significance of this impact can be judged from the role of the retail and wholesale trade in generating employment in the country. According to the National Sample Survey Office's survey of employment and unemployment in 2009-10, the service sector category that includes the wholesale and retail trade (besides the much smaller repair of motor vehicles, motorcycles and personal and household goods) provided jobs for 44 million in the total workforce of 459 million.
It is no doubt true that the impact of foreign-invested retail would be restricted to the urban areas since entry as of now is permitted only in cities with a population of more than one million. But this is where the employment in trade would be the highest. Twenty-six million out of the 44 million employed in the sector are located in urban areas. Many of these workers find themselves in the services sector (especially in the retail trade) because of inadequate employment opportunities in agriculture and manufacturing. Out of 71 million jobs in services in the urban areas, around 36 per cent are in the retail and wholesale trade and repair services. In sum, from an employment point of view this is a sector that is central to livelihoods, however precarious some of those jobs can be. It is a poor substitute for the missing social security programme.
Questionable claims
The government's claims that the entry of large retail led by transnational firms would not make a difference to net employment and would, in fact, augment it substantially are questionable. They exaggerate the direct and indirect employment that large retail would create and ignore the number of jobs they would displace. The requirement that the foreign investor should bring in a minimum investment of $100 million implies that the FDI being sought is in units that are more technology- and less labour-intensive. On the other hand, the attempt to temper the adverse impact on employment by restricting entry to cities with populations exceeding one million is without substance. It does not change the source of the competition (giants like Walmart, Carrefour, Tesco and Metro) nor the locations in which such competition is most likely to be faced.
Yet, the Commerce Minister's claim is that the policy has a “unique Indian imprint” that would make its impact here very different. This is a poor effort to obfuscate issues. Consider one aspect of the unique imprint: the requirement that 30 per cent of manufactured or processed products sold should be sourced from small and medium enterprises. This requirement based on a process of self-certification that is to be monitored would be difficult to implement even in India. But it becomes meaningless because it applies to such producers from anywhere in the world. As a briefing paper from the Commerce Ministry notes, in order to ensure that there is no violation of World Trade Organisation norms, “30 per cent sourcing is to be done from micro and small enterprises which can be done from anywhere in the world and is not India specific.” This would be impossible to implement and will only encourage international sourcing at the expense of domestic producers.
Rushed decision
In sum, there is little to justify the rushed decision to open up to FDI in retail. As of now the retail chain works well, there are no noticeable shortages, and a large and diverse country is well serviced. None but the government argues that FDI in retail is a remedy for the relentless inflation the country faces. The weak segment of the supply chain is the public distribution system created to ensure remunerative prices for farmers and reasonable prices for consumers. That and productivity enhancing public investment are what need the government's attention.
Not surprisingly, the decision to permit FDI in multi-brand retail has not been received well domestically. An Opposition, which was already engaged in highlighting the failure of the government to rein in inflation, corruption and the generation of black money, has responded with anger. Parliament remains stalled and non-functional, keeping in suspension other important issues and bills that need to be debated. Some allies of the Congress in the UPA have also had to express their opposition to the move.
Whether those deciding the economic policy of the UPA would budge and retract is yet to be seen. Given the on-going debate on the subject, the government must have anticipated opposition to its executive decision. But it possibly presumed that it can hold its position and win out at the end. The tussle is, therefore, likely to be long and socially wasteful.
(C.P. Chandrasekhar is Professor of Economics at Jawaharlal Nehru University, New Delhi.)
This article has been corrected for a typographical error
Keywords: FDI in retail, retail sector, foreign investment
The author has done a commendable job in bringing out the issue of FDI in such a lucid form that it can be well understood,even by a novice in economics like me.
we need infrastructure, indians can do more than the foreign companies ONLY IF
there is infrastructure.- struggling food industry entrepreneur
professor chandrashekhar has discussed very valid points. he accepts that the indian
industry is labor intrinsic. this is an endless toiling for millions of people. it does not add any
value to the economies. the jobs that are created by the international organizations ensure
that the living standards are at a higher level. we now need to think how to build economies
that will have a character and strength inbuilt. the current methodlogies adopted by both
govt and opposition are futile and are not solving problems of the nation either temporarily
or permanently. we have to find out real long term solutions and develop these techologies
or methodologies indigenously. we can look to the west for some interesting inspirations.
I have great respect for The Hindu in terms of the quality of writing and research done. Unfortunately too often in the last few years it has become a communist mouthpiece and I think this needs to stop. We need more unbiased and balanced reporting. Many past readers have stopped reading purely for this reason alone. I hope these journolists from JNU that you continuously allow to write in your paper know that before 91 we waited 4 years to get a phone connection. These days you can get a sim in minitues. Lets move ahead for reform and stop going into our socialist past which has never helped us.
I am sure Mr. Chandrashekhar was so bent upon proving his ideas right For one,the idea that government - the Indian government - can deliver every service that Indians require is by now, to put it mildly, discredited. PDS reform can solve all our farmers problems? And what of this: the retail sector is working relatively well, there are no shortages and we are well-serviced! Leftist economists have a place but not by trying to skew data to prove a point only you are convinced by. (Will the millions cited as retail-dependent all vanish?) Policies need to move with the times and India is in particularly urgent need of this. There is no denying that FDI will cause some churning. But is stasis preferable to a calibrated forward movement? How can The Hindu not have a properly analysed article that will not pander to subjective opinions? We don't need partisans of either side to be the loudest. We need people that can see what will work for the greater good.
I think the author has been cojent enough to misguide the readers. The bone of his argument is oligopoly and oligopsony. Is it not true if the margins of these retailers are high enough to earn above normal profit, it will defitely encourage many other players to enter the business, thereby shrinking the margins back to normal. After all anyone globally can join the bandwagon. My sincere advice would be please don't encourage making of a brickwall around India. What socialism and protectionism could realise in 40 yrs , much more was achieved in 20 yrs of liberalism.
This attempt of government is just to hide its inability to tame inflation and unemployment. Government shall work to provide infrastructure to farmer so that they can escape these middle men rather than allowing FDI in retail sector.
Great article. Thanks Mr. Chandrashekhar for this wonderful write-up. Completely agree with you. Appreciate your views. Lastly, to editor sir of 'THE HINDU'- thank a lot for publishing and sharing this article. It is very informative.
Those who are afraid that foreign retailers would initially sell at lower price and then would raise their price once they got the monopoly, this is bit absurd in the current context. It assumes that no other retailer would exist in the marketplace, not even Kirana stores. So imagine the scenario the foreign retailer raises price and people still go to that store because no other shop exist in the city! Why can't my local mom&pop open a shop that offers a lower price? Given the restrictions in place for foreign retailer how is it possible that all people would only head to the foreign retailer store! India is not the US where everybody has a car and they will drive 30 miles to visit the Walmart. In a free economy if Walmart raises price then Reliance Retail would offer the same goods for a lower price to attract customers. In reality, Walmart offers some of the lowest price in the US (I speak from first hand experience) even though they are in business for a long time.
The Kothawal chavadi, presently, the Koyambedu has not disturbed the local markets in Triplicane, Mylapore ,Mambalam etc. New markets have sprung up in Nanganallur, Tiruvanmiyur etc. The new shopping malls like Shoppers stop etc have in no way reduced the business in say Usman Road, T.Nagar. And so in other places like Mumbai,Delhi Kolkata and others. Markets have widened and many more people are working. The business in old Drama theatres and tent cinemas are now defunct,But more people are earning their livelihood in cinema production and TV shows. Airlines, railways ,telecommunications have brought the country closer and together. Initial fears of local displacements have given to more employment and business enlarged. The article is one sided and biased.
Before FDI 1. Quality of products in kiriana stores questionable 2. These vendors do not pay even a penny in their taxes 3. A percentage of the exisitng employment are child labors 4. Less carbon footprints After FDI 1. Improvement in food quality, although I just read a article about presence of significant arsenic in apple juice available in American stores. We have traditionally not been good at implementing regulations. 2. Receipts will bringout unpaid taxes 3. May discourage child labor 4. Carbon footprints are sure to increase. Fruits and vegetable will be carried from across the globe to feed a billion plus bellies. 5. Will definately affect economy in the long run, where people will be consuming more than they are producing, although it may play out differently considering the rapid changes that have taken place in the country in the past 10 years. FDI is inevitable. We like it or not.
Please have like buttons on each comments posted by other folks, it will
more sense.
Thank you,
People think that when players like Walmart enter the market, they
will reduce the price so much that the Indian players will loose the competitiveness for matching that price, as far as the smaller shops
are concerned they wont be bothered since the FDI is only applicable
to cities. And the other bigger Indian players, they are so smart that
they can try to emulate the business practices of these bigger guys
and can possibly compete with them hard enough. Players like Reliance
too have deeper pockets, don't underestimate them, I live in the US
for about 3 years, I can definitely say, we are so smart these days
that we don't have to fear any one in the world!!!
May be the real out come of this whole episode after 5 years could end
up funny also, like the bigger foreign players really not able to make
real stamp on the market, competing with our Indian bigger players,
anyways ultimately the consumer will benefit, this scenario is also
possible, nobody have to rule this out!! ha ha ha
Under the current scenario in India most of the retailers are responsible for selling counterfeit products. One can't even imagine adulteration becomes a mainstream in retail sales. Commodities like tea, coffee, biscuts, banana, edible oils , you name it, everything is adulterated. Its very difficult to track all these people who are doing it. I welcome to do business in India those large retailers like WalMart who shows high maturity and responsibility for purity and stable price. Even if they err it will be easy to point fingers and make them responsible by the law enforcement.
Professor has analysed a situation when FDI is allowed in multibrand retail. Why has he not analysed the existing system, where both farmers and consumers are squeezed? Farmers commit suicide regularly. There is a large scale evasion of taxes by traders. Cheating goes on both quality-wise and quantity-wise. Child labour is employed with impunity. Government officials are paid bribe regularly to keep the system running. With the entry of large operators with FDI in retail, farmers, consumers and governments get a better deal. Element of competition will bring down prices, improve quality and better service will be expected. The states who fear compitition and side with trader/middle men can continue as it is now. Why prevent those who are innovative and want to experiment?
Time for Hindu editors to introspect and ensure only balanced opinions are
published and not let the debate hijacked by either extreme left or right leaning
authors. I live in Australia where there are only 2 major supermarket chains which
control 90% of grocery market. I can easily relate to the authors concerns. However I
am apalled that he did not mention any merits of letting organised retail enter the
country. Personally I think the government should allow a gradual increase in FDI in
retail trade while letting the Indian retail gaints mature and able to compete with the
big multinationals while ensuring atleast 6 or more players are on the ground in any
town, city or metro so that competition remains stiff. The organised retail trade is
bound to wipe out street corner traders sooner or later. Big MNCs like any
corporation do business only for profit and it is upto policy makers to put in place
checks and balances and create level playing field for all.
All mncs or ncs, big companies are inclined towards monopolizing markets. Their policies are aimed at stamping out to competition. This is donenot necessarily by superior or efficient technology, but superior finance. Like Times paper when entering new mkt sells newspaper for ridiculous price of 1 re or less to kill all local papers. It's news coverage is in no way better, or only marginally if so. Just like the concept of communalism is idealistic, but flawed when played out, so is concept of free market and capitalism.
Most of the comments sees all the goods thing FDI will bring. Can any one reply why the benefits can not be implemented by the current players. Purpose of any company investing money is not to do charity but to earn profit. Initially, it will look as if consumers are getting quality products at lesser rates but later on it is going to be monopoly situation where the consumers will be a looser as by that that time they become habitual of these big shoping Malls. Think about the country and not for your comfort.
The author has rightly written about the damage they do to the Indian economy as a whole. For those who support FDI in retail should look at what happened in the western economies. In US large retailers like Walmart almost totally eliminated Mom and Pop shops which in turn drastically effected the US local producers. This impacted the US economy and we know the state of the US economy today. So a concept which did not work in US and Europe is being forced upon our Country. So I fully endorse the stand taken by the author C.P Chandrashekar. Way forward for farmers in sustainable agriculture and not FDI in retail.
Article describes only negative aspect of FDI in retail besides it can
create oligoposony and oligopoly situation but it can assure more tax
revenue on retail transactions which may be utilise by govt ,,however
govt should protect the interest of small retailers
with all the positive point which are being presented in the favor
of the foreign retailers, that they will come and improve the supply
chain, they will come and create jobs, they will pay our farmers and
producers better amount and displace the rotten system of middlemen,
they will create better infrastructure etc... there is a deep
question that if we have identified the problems with our retail
system then dont we have the ability and will to counter and improve
them by ourselves?? it is true that in the present time of
globalization, India should not prevent the entry of international
players in our market, but how justified is the act to surrender our
retail markets to them to take care of it, in the hope that only the
foreign retailers could and would salvage our rotten and backward
system. Our government and local private players should also strive
to improve our system with a will and determination rather than
waiting that someone from foreign will come and provide us NIRVANA!
Any analysis must consider what has happened under marixist country, todays economic behemoth : China. It has allowed every possible global retailer, spruced up the complete value chains, enabled the surplus to be fedback into the economy, facilitated the modernisation of the local Kirana equivalents to continue to be viable and competitive to the neighbourhood target markets. Overall, a recipe for success to all the stakeholders. Why cant we emulate China in such policies, free up the economy from the antiquated mindsets and useless rhetoric and do indeed help the farmer who can get much better market prices than being at the mercy of the so many intermediaries? In essence the current posturing of the opposition smacks of the absolute double standards: while in power support the FDI and while in opposition raise up the muck on every policy matter; they must provide alternatives, constructively than obstructing the parliament from doing business.
Almost all comments here are very decent and well thought of.In fact there is hardly any argument against FDI. If we invite FDI in a,b and c, why not d? if We enjoy and are proud of our shops in foreign regions and our mediocre IT firms earning billions(hardly anybody doing real ground work or research) what right we have to cry against Retails>? We want to talk of globalization and we want to shun our doors?And why nobody talks of consumers- the kind? The mediocre kiranastores have never grown over years,only 11 paise of a rupee reaches end line-producer.Whats wrong in maximizing system? Its this class which is making big noise,naturally.When Malls came,we had seen similar outcry.No loss happened.The middleman(the traders) are not saints. Let there be competition,survival of fittest.In fact its a win win situation.The argument of unemployment is hoax.Some groups and so called thinkers have tendency to oppose whatever govt does as also the myopic opposition.Lets be balanced.
Among the many pros and cons of the issue of FDI in retail, there is no mention of consumerism and environmental burden. We already have plenty of supermarket chains chock-a-block. In the race to offer items at cheaper rates, supermarkets outdo each other with very alluring offers. Those who can afford it, will continue to make use of these offers, even if they do not need the item!
All these chains most likely include CSR departments, whose most evident job is to put out notices of reduced plastic / polythene use, even as more items are packaged attractively in plastic. Why is nobody addressing issues of extended producer responsibility and solid waste management, other than cursory unimplementable notifications from the MoEF? The need of the hour is to regulate existing chains to display enough social responsibility in all aspects of their operations, and to regulate quality standards in unorganised retail, instead of introducing more chains who will add to the existing civic burden.
Hello Author. *THANK YOU* You reflect my mind. I see lot of people who shop at Big Bazaar having a taste to shop at Walmart in future. They are the only ones who want Walmart. I know how communities across America opposed Walmart in their neighborhoods. See the quality of wages and people employed at Walmarts - even the quality of products; horrible. We don't need a Walmart. I need to know one thing. Big Bazaar, LifeStyle, RelianceFresh, StarBazaar, WestSide and several others are doing wonderful. Why do you need a FDI now? What Swadeshi Congress is this? Why can't you develop infrastructure of existing giants such as Tata, Reliance and Pantaloon? Congress is selling India. The person who constructs a shop, educates his children, buys a house etc are intermediate entitites in food chain(economic chain). Fighting with them won't serve the natural economic chain. This FDI plan is good 15years from now. For gods sake, keep it away.
Based on the Census data available there are hardly 35 cities with more than 1 million population. Even if we account for increase in population from the last census and add in a few cities, say 60 it is hard to believe that retail investment in these 60 cities will bring down the entire retail sector of a country as large as India.
The author simply does not understand economics, FDI in this sector is very essential to kick out middlemen and untidy markets which is full of filth, if the opposition is so concerened about farmers and employment opportunities of others they should force the government to link all the rivers and push for more investment in infrastructure. Our opposition comprises of extremely wise men and women that not a single idiot has ever thought of controlling our population, they have never come up with any proposition that would help our exports, nor industrialisation, to hell with these old men and their advice, they are living in times which does not belong to them.
From the column above, if the writer is really concerned about the employment being replaced by the advent of FDI and likes to stop it - he should think once why is he questioning 'why India is still a developing country?'. A country can't develop by simply resisting and abstaining from progressive measures. You can't expect to move being stubborn. The fact is, FDI would definitely bring in some investments which is helpful for our country to step ahead. There are 2 points to analyse.1) If a particular store doesn't buy a thing from our country then most likely it would get that product from a cheaper source according to business ethics which would eventually benefit the consumer. 2) If it buys from the local source, it is even good that the proletariat gets some benefit.
In Either ways someone in the chain would benefit. We need not raise our voice until there is a scam behind this or any self-fish motives of(congress) making money before the next elections.
We always make a hue and cry about price-rise of food related goods, from time to time.But we do not realize that the price-rise is not happening due to any governmental increase.The farmers / producers do not get the benefit of the increase of retail price. It is quite obvious that prices increase because of the unholy alliance between the middlemen and the traders whose sole motive is to multiply their margin of profit.The actual sufferers are the consumers as well as the farmers / producers.With the introduction of FDI the situation will change drastically in favour of the farmers / consumers.But,I am afraid that the farmers of the remote villages will be left to be under the mercy of the unscrupulous middlemen and the small and medium scale traders.The fate of the rural consumers will also be the same.
The author is clueless on retail. Don't know how he became a professor
at a major university.
World wide retailers work with 3% to 4% margins. Retail is not
considered has high margin business. The single digit margins are achieved by decreasing inefficiencies in supply chain, minimizing
waste, etc.
If India needs to maintain its growth it must open retail so that
waste is reduced. Else in few years we will not be able to feed our
own population. As per Indian agricultural statistics yield on land in
India is decreasing every year in last 15 to 20 years.
Wastage in agriculture, electricity distribution, industrial
production, transportation, and other areas must be decreased else we
will not be able to survive as one country.
Think about the fact Walmart is one of the largest purchaser of
various goods from China for world wide supply. If we open our markets
Walmart can source Indian goods for world wide supply.
Economies including communist China which have opened up to FDI are
benefiting from it with sustainable high annual growth rate. History
is proof that an open market economy is a far better economic
equalizer than a closed economy. A closed economy is nothing more than
a state supported monopoly. Without allowing FDI in retail we are
giving monopoly to Indian companies like Reliance, Tata etc in retail
sector. FDI in retail will create jobs in addition to making the
middlemen irrelevant.
There are multiple articles published by The Hindu againt FDI in
retail listing out its disadvantages. I hope The Hindu publishes
articles in favour of FDI, with relevant advantages, so that people
can make an informed decision.
In short, India is young and people want more economic freedom.
The Prime Minister has chosen a wrong way to communicate a
theoretically correct decision. While its clear that this decision had
already been made internally long back (based on corresponding
comments from US and other Western country leaders), the announcement
timing was forced by Dr. Singh's fear about India's forex situation
and drying up of FDI in financial sectors like stocks. Without micro
reforms at other levels like making road laying a profitable private
enterprise, setting of small power plants with minimal tax burdens for
the power company etc, there is no point in going for big bang
approach. Either Dr. Singh fears that his tenure as PM is going to end
soon or there are some other factors (aka window dressing of economy
via FII / Stock markets has finally failed in view of reduced inflow
of dollars). Theoretical approach not backed by incrementally built
capacity and capability on the real ground is often a failed
enterprise. Wishing good luck to PM for a victory here.
Licence Raj here again in modern form.
Sir, ask the foreign retailers why they want to invest in
India? They will tell you, they are specialized in this
field and have a lot of knowledge. Good, then why they
need India? And here you will see they have no answer.
The Congress and its allies are selling out India. India
have no need such an investement. Indians are more clever
than the foreigners. Why we do need them? You see, this is
not in the benefit of Indians. The Congress are playing a
game. Take the exchange rate of the Rupee. Suppose it is
1 Rupee is 55 US$ or 1 Rupee is 60 Euro ; what
is the meaning of this? Herewith you can find out that the
foreigners will bring less money to India and take 50 or 60
times more the value abroad. Meaning of this is; India
will become poorer. Why the Rupee is so down? No reason
for it. The Rupee has the same value, but the West refused
it.
Don't argue about the nuts and bolts, lets talk philosophy. The world economy and ecology is in shambles today because govt. policies have encouraged consumption, excessive dependence on natural resources, centralization of wealth (and hence power) and multinationals dictating the future of sovereign nations. Farmers have been killed because of foreign interference in agriculture and agro-business. There is a reason why Indian economy has thrived for thousands of years whereas every capital oriented experiment - Capitalism, Communism, Socialism etc.. have failed. It is because SPIRITUALITY has guided our economy, science and arts - capital (or Laxmi) is just an outcome. Say NO to FDI in every area and put policies in place that encourage decentralization; encourage small business; local production and distribution; local and seasonal consumption.
As always a very well researched article from Prof. Chandrashekhar. It is very informative and explains the things very well citing proper facts and data. The facts and data is what is missing in pro FDI propagandists. There are some people who are asking for the other side, they should go and read TOI instead. The Hindu should not stoop to the level of TOI.
Even though the consumers will benefit by getting products at a low price, there is no guarantee, this will benefit the farmers and create large employment opportunities for indians except for hiring a few hundred thousand store clerks, security guards, Goods loaders, truck drivers etc .Govt should instead focus on infrastructure building like efficient power,water and roads/railways/airports and cold storage facilities to farmers & indian retailers themselves will become as good as international retail chains. The main problem in India is basic infrastructure a nd if that is solved, rest will fall into place.
In a globalised world any one can invest any where? Is it that way? No. Why are US/European farmers are heavily subsidised? FDI in retail or any field could be welcomed when there is a level playing field. Indian farmer competing with US/European farmer has killed the Indian farmer. It is easy for a internet savvy IT engineer or a white collar employee to sit in an AC room and lecture about Globalisation and all. In the ground it is lives of people that is the cost. As in the documentary on farmer suicides NEROs GUESTS, the upper middle class has become Neros Guests, watching the lives of fellow Indians being crushed. Shame on you.
Large percentage of our population is below poverty line. Human development indicators are pathetic. Will the Wallmart help the downtrodden? No. Customer means rich/middle class customers. Will Wallmart save the farmers? Will the coconut farmers get 20 Rs per coconut if WM comes? In the documentary "Walmart - High Cost Of Low Price", an American says, "Wallmart is a chinese company with a US board of members". Wallmart have zero social responsibility to their own country/men or to even their own employees.
Middlemen/procurement/stocking etc. are secondary issues cited as the reason for farm crisis. Farm suicides started after neo-liberal reforms. Green revolution was an emphatic success. Now after the neo-liberal reforms, farmers found it hard to compete with heavily subsidized US/European farmers. If the GoI is honest (which they are not), they should stop anti-farmer policies, rather than raising pretentious claims in order to fool people.
our farmers production is good but supplies and profits r bad due to middlemen.retail for the consumer is good so follow a model based on airtel mart in vijayawada,andra pradesh where they buy from producers and sell to retailers bcoming quality middlemen accountable for loss or exploiration
Great tactics! Now we all forgot about the mega scams and corruption to the core by this Govt. Now the Govt has taken the heat out of scams and diverted the public attention. For media another hot topic to make and sell news! For readers another time pass for nothing. Thus goes the high pitch drama ...the corrupt politicians scot free because of our short memory and by diversionary tactics.
FDI when it comes to Food items is a concern. Why do you think that only Foreign companies have big pockets to invest in India. The fact remains that with a company like ITC or HUL the money still stays in India while a WAL-MART or CarreFour the money moves out. (The profit moves out). This will in a way help their own pockets but not help in future investments here. Is there a regulation that says that the Foreign Investors should spend atleast 70% of the profits within the country itself.
Also one other area I am concerned is that, they will kill competition in totality initially as they have huge pockets, kill producers and manufacturers by making unrealistic demands for lowcosts, affect small shops who encourage small entrepreneurs with their produce.
Manufacturers will be forced to sell to only these big companies at a prize demanded by them.
I might be wrong but allowing a single big player is OK but consider 10 players compete all @ rocket bottom prizes where will the others
We should probably go slow in implementing FDI in multi-brand retail markets. There are few things we need to get correct among us. The middlemen indeed are greatly responsible for inflation in our country. The lack of a professional structure in the supply chain is also hurting us through wastage and inefficiency in supply of food/agri products adding to the end costs. Though the FDI will solve these issues, it does have the capacity to overwhelm existing players just because of their deep pockets which really should not happen. First we need to strengthen our own players who should be able to do same business in the same way (of scale and technology as the invitees through FDI). This will definitely upgrade the capabilities of infrastructure which the FDI players can later source through locally. We need to gather more manufacturing capabilities in sectors which would be a market with multi-brand retailers. FDI in single brand retail segment is a definite welcome.
Why cant we improve the current setup of distributorship, just as Amul
did with milk products be seen for other items as well.
This will help India shape up a better distribution and availability
When I read some comments from the reader, I was wondering, are these people really know how in developed world, this big retail chains killed the local mom and pop shops ( which as per one comment the Nadar and chettiar kadais / shops . In US Wallmart killed those shops. Initially people here was happy to get cheap chineese goods ( thus China got rich) later they found that it is not good for the country, but now it is an impossible task to reverse the trend, what happend, US carrying a bowl to China to beg for money. These huge corporation dont have any reason to make India a better country. I understand the frustration of India's consumers, what we should do is try to increase the efficiency of the existing system , than bringing something from outside, that will be like buying a cancer with your own money.So you should know what you are wishing for.
It must be said that this piece smacks of communist ideology and pessimism. Certainly the Professor's assertion that one must save the notorious middlemen in our current supply chain was perhaps unwise given a middle-class readership. There are pros and cons to FDI in retail which is why so many sections of society have ambivalent views on the subject, myself included. We recognise the need for massive investment in the backend infrastructure in our retail chain and efficiency improvements, which FDI would cover, but there is a real and present danger to smaller retailers besides others. In my mind the cons outweigh the pros, but that's just me. The one egregious move on the part of the government was to adopt this policy without first raising it in parliament. This oversight and its timing whilst parliament is in session has, very rightly, raised many eyebrows.
FDI in retail chain will leave opportunities which follows competition. In the long run there will be perceptible gains to the customer. Since the Govt has opened up the FDI with riders & safety valves, the proposal should be welcome. The apprehension that it will lead to unemployment is unfounded & illogical.And on the contrary there will be better opportunitis for generation of employment. There should be an approach with an open mind and we should think beyond any political consideration, In any progressive move like this there is bound to be oppositions but as we could take the cue from the global scenario & in the couse of time, the proposed move for FDI will be proved successful as "proof of pudding is being in eating"
The Hindu should also make an attempt to publish the other side of this argument,lest it be seen as a mouthpiece for the left leaning movement. As one of the readers observed, one sided opposition to foreign investment does not truly educate the public on the pros and cons of the matter.
I care as much about the middle men as I do about what's happening with Kardashians. Let's keep our inefficient middlemen because we have a solemn duty as fellow citizen to feed their mouth. No. The middle class pays taxes, keeps the country going and the least we need is parking space for shopping and cereals that are as good as they should be.
The rest is noise.
If some socialist wants to keep the middlemen and preserve their livelihood, why not have them lay more roads, build more dams.The country needs these services badly and there is money to be made in these.
Please. Dont. Stop. Progress.
In the times of increased inflation hovering around 10% for quite some
time Indian consumer has every right to ask for quality which these
behemoths are going to bring in by economies of scale.Hierarchy of
middle man between producer and consumer has caused loss to producer
and consumer both.It has potential to revolutionize retail sector which
is largely choked at entry points with better regulatory framework.
Article is spot-on. FDI in retail is NOT the solution for fixing
inefficiencies in the system. In fact, it is a very, very dangerous
proposal. One doesn't have to look too-far: Just look at the US
unemployment rate! Why is there an occupy-WallStreet movement? It is
true that consumers have greater accessibility to cheaper products.
But, at the cost of what? Where does the money from all that consumer
spending go? Why has Detroit turned into a city of ruins? For India to
survive with a billion plus of her children, it is imperative to keep
the lowest earners employed. To give an example: One can easily build
a section of the road, very efficiently, by hiring a foreign
contractor with all their heavy machinery. You can even convince
yourself by saying they will hire local labor. But the truth is, at
the end of the day or week, you would have fed only 50 families out of
a 1000. Where will this lead to? Anarchy! Social unrest in Greece, UK,
US, etc is just the tip of the iceberg!
I agree with the 1st comment of Mukundagiri. There are positive as
well as negative effects of the FDI in retail Sphere. However, the
Author have not cited its positive outcomes.The advantages of
allowing unrestrained FDI in the retail sector evidently outweigh
the disadvantages attached to it. However, FDI in multi-brand
retailing must be dealt cautiously as it has direct impact on a
large chunk of population. Left alone foreign capital will seek ways
through which it can only multiply itself, and unthinking
application of capital for profit, given our peculiar socio-economic
conditions, may spell doom and deepen the gap between the rich and
the poor. Thus the proliferation of foreign capital into multi-brand
retailing needs to be anchored in such a way that it results in a
win-win situation for India. This can be done by integrating into
the rules and regulations for FDI in multi-brand retailing certain
inbuilt safety valves.
Thirty years ago a person in an office had a secretary with a typewriter. Now not many people who work in offices (other than in Indian government and public sector units) have this setup - the person now has a computer which made several secretaries, typewriters and even lots of paper redundant. Going by the arguments of this article, hence computers, the internet, Hindu website etc should be banned.
Further there are several other fallacies - a farmer who has access to buyers from "Oligoposony" comprised of Walmart, Carrefour, Ahold, Metro and Tesco in addition to eChoupal, Reliance etc is in an infinitely better shape than selling to a dealer in a local mandi. Similarly the Indian consumer has infinitely more choice in the Oligopoly of these names. If any, this is increasing competitiveness and not reducing it.
The problem of our country policy makers from starting to till now is that they did everything for us which was not ours.either constitution construction or like FDI or others.
Why they do'nt understand the needs of common man? we are just going on western road without genuine consensus inspite of knowing that weste has not the way for it's own people.
plz do'nt interrupt in the way of indian life style.It is india, sorry incredible india. Acommon man know how to run a family inherently,no need to him to teach the lession of life in western classroom.
The author has given a very one sided view of the FDI topic by highlighting only the concerns.What about the better technology/infrastructure the retail giants will bring in India?,i strongly beleive that it will help in reducing food wastage apart from giving the producers a better share for their output.Everything coin has two faces so is this issue but we should more optimistic and future oriented rather then relying on archaic supply-chain models albeit the worries remain and Govt. should come up with some impressive measure inorder to allay the fears of concerned parties.
This is ridiculous article. If this has happened to Indian companies in foreign countries, I am sure the same author would have raised hue and cry about this but when this happens to foreign investors in India, the Indians are just protecting themselves.
These are the same type of ridiculous apprehensions raised during 1991 liberalisation move. The issue here is not about allowing FDI in Retail or not - the issue should be how you prevent monopolisation and maintain diverse players in Retail.
What is difference between FDI in retail and current Indian Chain retail markets like Reliance, Spencers except the word foreign? these are into this business for many years, still the street vendors, keerana stores are surviving in urban areas, so the employment in retail has not gone any where in cities. There will be always consumers who can buy things from keeranas at least for the next 50 years if are optimistic about our nation's growth, so the people who are now poor will transform to lower middle class or middile class.
I hope for the sake of fairness a national newspaper like The Hindu would also invite a Leader Page article from a supporter of FDI in multibrand retail. Otherwise it creates an one-sided view on the whole debate. I request The Hindu editors to allow articles from both sides on the debate and let the readers decide for themselves.
The Author's views borders on the nonsense.He advocates the possibility of loss of jobs on large scale which is hyperbole of the worst kind. Firstly, the country's left leaning socialists make a hue and cry over Foreign Direct Investment without realizing that in a gloalised world, Every country big or small can invest in any country. He may be surprised to learn that Indian corporates have set shot in small countries and sourced our goods to these countries resulting in the loss of some jobs there. Still they provided good service and the countries which lost few jobs have moved their capabilities and resources in other places. Globalisation is a two way street. Secondly, by siding with the people who oppose a change in system, He is guarding the Middle men and the real blook suckers who suck it either way from farmers and consumers who are by large ain huge numbers.The loss of jobs is natural and shouldn't the hawkers (young hawkers) be actually in school studying and aiming big jobs
India has to decide whether it wants to remain protected economy or free economy. When we want to compete in BPO and software in US and demand level playing ground, it is only logical that We reciprocate the same in retail sector. Necessity is the mother of invention. Automobile industry was once upon a time monopolized by Americans till the Japanese innovation displaced them. The domestic retail industry has to innovate to stay in the competition and I am sure it will.
Is there anyone who cares for the consumers what they want? We want a quality service from our stores which only big stores can provide. They are going to pay the taxes as well. So its a win win situation for consumers and government both. Why so hue n cry, after all it is survival of the fittest. We are exporting a lot of software and services to them, I think they should block Indian software companies as well. Totally one sided of the story.........
We should open our door if there are chances of more employments.
but the govt should have control over these Retail Giants.
One can understand the anxiety about impact of FDI in retail. But I wish to say that Mr. C. P. Chandrasekhar's opposition to the FDI in retail is not 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.
let there be more than 50%sourcing for FDI. this is definitely a good idea provided everything is regulated and controlled properly. The negative impact on the domestic supplies should be reduced to minimum.we can have groups formed among the suppliers of the same raw material and outsourcing can be done together as a single group. the payment can be distributed equally. this helps the party in the group with lesser harvest.The profit obtained can be shared depending on how much they have provided individually.this helps to strike a balance among the parties in the same group.the main aim should be minimum damage to the small retailers.
@Mukundagiri: U almost spoke my words away..
The question is not whether the UPA having raised this issue is whole heartedly generously intended for the public.. Irrespective of who the GoI is and who the opponentrs are. we need to raise a genuine debate on the same..
If for eg: Wallmart can manage to get a product from China at arate cheaper than locally produced.. Is it wrond with wallmart or is something wrong with this country?!
The country is reeling under the weight of inflation.. Whoever seels things cheaper.. gets the better hand.. ther is no doubt about it.. One first needs to eat a bare meal.. who cares whther its organic or not..!!!
A very lop sided article. In cities like Blore, Chennai & hyderabad, organized reatail is as much as 20-30% of total retail trade. Has the Kirana store disappeared. Today the farmer is still at the mercy of Oligopolistic Buyers: the middleman. neither the consumer nore the farmer benefits. With Fruot & veg losses being as high as 30-40%.The farm gate to plate prices are more than double treble with the money being pcoketed by Middleman. Is this not a case of Middleman Appropriating all cash. Organized reatail brings in huge investement and supply chain Effeciencies. The neighbhourhood Kirana store will never vanish but will evolve and acquire competencies which will make him indispensable to the Indian Housewife. For organized retail to emerge space is an important constraint. None of our metro Cities have such properties which can be used for such formats. Hence it is not going to be easy for these Giants to swamp the kirana Store. He is a hardy customer who knows how to compete.
Professor Chandrasekhar's article seems to be very one-sided, solely with the aim of discrediting the FDI policy in Retail. He doesn't talk about the problems that are in the current retail sector both for producers and for consumers. Farmers, for instance, lose a lot of their vegetable produce due to poor logistics (storage/transportation) and what reaches the consumers is probably less than 50% of what they produce. Secondly, they are having to go through several middlemen which means what they're getting for their produce is a small proportion of what the consumers are paying. For consumers, getting quality goods and produce at affordable prices is becoming increasingly difficult. We are all having to put up with the local grocery shop where the quality of goods is variable and all products are sold at the maximum retail price.(In some rural areas, the local shops sell at more than the MRP.) What we need is a more balanced debate, not just a blind rhetorical and political posturing.
Our PM should not allow 51% ownership for global players to come and invest directly in India. India is still a growing country, yet to equip itself in various areas to face the global competition in India, such as technology, SCM. Infra, Services, Inventory, etc. These global giants will wipe out lot of our departmental stores, big bazzars, supermarkets and road side vendors. If we really want to allow them in India, we equip ourselves first, then let us face any giants in India.
Simple maths, as a consumer if I pay Rs.100/- for a stuff and of this 60-80% goes to intermediary, if FDI in retail comes in, I pay only 1/2 (half) of what I pay now, that is additional Rs.50/- for my family budget. The farmer, 70% of Indians live in Villages, if they get twice( x 2) times waht they get now for the produce, see the huge surplus/ development it takes. Farmers do not want subsidies or largesse, they are too proud for that and also But yes, the farmers donot pay any money to the politicians, only the traders pay, so naturally, the politicians/political parties will get hit..
The people who speak for the 100% FDI are the ones who probably have never moved out of their local. Retail activities in countries such as UK where I live are run by such chains (Sainsurys, Tesco, Asda (walmart), Waitrose and a few others) that hold 96% of the market share and they move the price of essentials at will and no government policy can stop it. If they see a crop failure in some far of distant land they start hoarding stocks and pushing up prices from day one until the next crop comes up.
Bread was sold at 19pence just 4 years ago and now it is sold at 57 pence, that’s a three time increase and so is the case with milk and other essentials. NO WONDER, UK AND EUROPE are grappling with house debt. India is a saving country and we have the highest savings rate in the world, these foreign governments know where wealth can be stolen from and puppets like our current executives (bureaucrats and politicians) will sell our nation back to the foreigners in various forms.
I don't understand why The Hindu is always saying/printing negative view about the FDI in retail.
The UPA Government is out to sell the country in parts. Prof Chandrasekar has given a thought provoking article. We can only hope and pray that atleast a handful of our politicians read these articles.
Mulitnationals like Walmart, Carrefour and Tesco have been doing this business for decades and they know how to twist and tweek the rules. In India, with a passion for corruption these mega store promoters can get away with anything.
India Inc, must focus on (1) improving the public distribution (They can hire good Consultants to do business process and organisational changes right from procurement, storage, logistics and distribution). (2)Build/improve Warehoues/cold storages nationwide. (3)Improve Logistics so that the procured items can reach the storage with Zero Wastage and slippage (4)Make auditing of our Warehouses a mandatory exercise and make the officers accountable for it. (5) Ensure that the procure can reach from any part of the country to anywhere( Logistics!)
Well, I fully expected The Hindu to carry an FDI bashing article. Jokes apart.
FDI in retail was a much awaited decision to streamline the supply infrastructure and thus stabilize prices. The voices being raised against are the same ones as 20 years ago.
Hindustan Motors vehemently opposed FDI in automobile. If we would have listened to them, or the other naysayers, even the above JNU professor would have been traveling in a decrepit Ambassador!
Why should India and Indians do the developed countries which are now in economic doldrums the favour of opening up this 1.2 billion strong market? The economic growth rate of India is already too unmanageable, look at the inflation rate. The quantity and quality of employment to be generated by hyper markets is questionable. Mechanisation will invariably result from induction of huge investment volumes, translating into less and less workers per 100 sq. ft of retail space. And there will be a mad rush of high school dropouts for these temporary, back-breaking jobs, resulting in social tension. We already have the experience of high drug abuse and HIV incidence in the BPOs -- a fact which NASCOM had to admit when the UN's office for Drugs and Crime produced the evidence. We have to see the futility of this in the light of the past 20 years' experience under liberalisation. We still haven't identified priority areas for FDI mobilisation and certainly retail isn't a priority.
First of all we have to accept the fact that we are not competent enough to face the global retail machos. We still have the opportunity to learn from them by allowing the FDIs in Retail sector and equip ourselves. Definitely, we being the consumers will be able to buy the globally available best products at affordable price in India. We will know the meaning of 'quality' only by allowing the global big players into our market. We all know the meaning of comfort, quality, luxury, joy of driving and so on in car segments only after allowing the global automobile players into this sector. Our so called ex market leader was wiped out by global players of being incompetent. So, let us allow FDI to bring more benefit to millions of consumers of India.
I believe FDI in retail is much necessary since the Indian retail stores have not been that effective in replacing the middlemen. If the farmers get up to 80 -90% in the supply chain, why are so many farmers poor. The current system is flawed. We cannot keep our eyes closed and permit status quo.I hail the decision of MMS. Majority of the people in India would support this, forget the politics.
I was surprised to note that the author is a professor of economics. If we accept the views here as truths, the issue goes beyond just ownership. Why FDI, even national/ regional retail chains shouldn't be allowed. Or Apna Bazar or cooperative chains like Amudham or Amul for that matter.
The good professor would know that disintermediaration is a proven practice to improve the lot of both producers and customers. The whole debate should be not on the need for disintermediaration, but on ownership.
For 65 years, this country has treated traders as a venal lot exploiting both producers and consumers. And suddenly, everybody is on their side.
What is interesting is that the article seeks to give an impression, without actually saying so, that the retail trade constitues a huge bulk of the 44 Mn in the services sector and that so many livelihoods are at stake
The media has become so negative on FDI in multibrand retail sector. It encourages authors who are so negative. IF India wants to be a superpower and will become an advanced country status, it has to admit the FDI. Without having integration with global countries, we cannot grow and compete our direct rival China. We have been showing our GDP growth in our economy not because of our domestic industries performance, but because of MNCs contribution and other countries' economic integration. We enjoy all the globally available cars in India, just because of FDI in automobile. First let us understand and digest this fact. Let us allow our consumers to enjoy the globally available products, brands in Indian Retail Stores henceforth due to FDI. BE POSITIVE GUYS.
In all the debate regarding the FDI, one aspect that is commonly
overlooked is how it will affect the consumer as they are one of
the primary stakeholders. Let me give you an anecdote.
In my personal experience shopping for furniture in India early
this year, I found that there were very few options. There are the
so called boutique shops with very nice designs but with sky high
price tags and those shops that were affordable were just blah. As
a consumer, I felt very disadvantaged because of the system. I am
sure there are a lot of middle men at least in the furniture
industry to account for such a phenomenon. Should we compromise on
quality and variety just because it will benefit the few middle
men?
Prof Chandrasekar has done a good job by his clear exposition of Government's
proposal to allow the FDI retail to enter the country and its possible adverse effect
on the county's economy. . Government, it is evident, is bent upon pushing the
proposal through the Parliament in spite of the vehement opposition by the
Opposition parties and the two allies of the UPA viz the DMK and Mamta's
Congress. Such a step would throw millions of petty traders out of their profession
at one stroke is beyond doubt. The argument that millions of jobs would be
created is only a myth and does not need scrutiny even for a moment. It will also
result in a law and order problem - a possibility which should not be overlooked.
Taking all these negative factors into consideration, Government will do well to
scrap the proposal in toto which will be in the larger interests of the nation
While its good to have views that encourage deeper discussion, the
tone of the article was decisively negative. Nowhere in the article
was it mentioned that the foreign chains can bring their expertise in
building supply chains (especially cold chains) to India. This is
ensured by the clause that 50% of all investment should be aimed at
building the supply chain backbone. An estimated 50% of all vegetables
rot by the time they make it to the retailer. This would also help in
reducing that percentage. As the writer notes, public distribution
system is a weak point in the supply chain and hence we do need these
world class capabilities to strengthen our backbone. As for
competition, Reliance, Future Group and other chains have had good
gestation periods and should be able to give good competition. Kirana
stores may not be impacted as expected since for normal purchases, no
one will take the trouble of going to a hypermarket. These points
should also be highlighted.
This is one sided article and the author is heavily biased with the "anti-liberal" ideology. Undoubtedly every new initiative would cause some amount of pain the a tiny minority; but considering the larger interest of the consumers and poor Indians who inevitably depend upon the middleman based retailer system, it is a good move and instead of turning down the merits of the decision, author would have suggested additional safeguard measures to minimize the risk.
In fact, if the Govt. would not have allowed MNCs in retail, it would be certain that domestic mass retailers would have captured the market soon.
Farmers will benefit, and I don't care about the so called "small traders" who make millions WITHOUT paying tax. The government should allow FDI since will benefit the 1 billion. I think the good of 1 billion out weight the suffering of a few million "small traders"
I agree the writer is on a pessimistic approach , communistic view, open to international trade, when we earn in billions through software export , we should allow foreign companies to loot us. Create jobs. Hell! where is the power to illuminate and chill the spaces where these malls will have. 3000 MW of power will be needed by the Estimated big malls. All existing indian retails( Profit and Non Profit making ) will sell to a huge profit to MNC's in black and do you expect the MNC Retail gains to sell like uzhavar sandhai. Coke and Pepsi has killed the local market for soft drinks, which can never be revived. The same will happen for even the Rs. 10 Homemade snacks sold in small retails like Kannan Stores or even smaller ones.
Comparing ourselves to Thailand is stupid . They follow the rules strictly. You cannot bring any product into the shelf without FDA approval, also even if imported without all the information in local language.I could food items in chinese on the shelfs now
Someday ,it had to be done.Harsh steps had to be taken;all this hysteria had to happen as it always does when you try to do something new;some people get displaced, some lose livelihood but for a distant better future. When you try to come out of your comfort zone,you face the heat of the common man settled in his outlook.
But what if the 'oligopoly' takes advantage of their strong presence?what if they don't give the fair amount to the farmers? what if they collude with the Govt. as in 2g spectrum case and other big corporates scams?It s good to get rid of so many small middle men who eat up the farmers' share,but what if farmers still don't get their share?
It s a big dilemma...Some people say we have a good 'retail sector' and why to disturb the balance and others' don't even agree to it.
Also,it might just be the last "saving grace" for the otherwise doomed Congress.So,is it because of political reasons to divert the attention or to seriously open up the sector.
I fully support the government's decision to open up the floodgates for FDI in retail and new inernational retail players. Right now, our shopkeepers do not know how to do business and we need high degree of professionalism. Malls were opposed initially by political parties, but in large towns malls are big hit and items are cheaper. Multiplex too was opposed but today the Hindi cinema survives only due to the multiplexes. In the open economy, unprofessional businesses will fall by the wayside, but we can't help.
Prof.Chandrasekhar expects Punjab farmers to continue to sell potatoes at Rs.3 a kilo and Andhra farmers to continue to sell onions at Rs.2 a kilo to keep traders in employment.If we allow the things to continue as they are there will be no farmers left to feed traders as well as other consumers.Please don't mislead the public ,let reforms take place.
Sekhar
One should not belittle the government by completely writing of every
policy decision it takes. On the one hand Opposition accuse that the
government is suffering from policy paralysis and on the other it
again oppose every policy decision uprightly. Rather than debating the
issue in parliament opposition seems to enjoy to block every move the
government takes to propagate economic growth. Government should also
take opposition view in account while moving ahead with its decision.
Government should move ahead with FDI in retail on a pilot basis first
in selected 5-10 cities.Depending on the socio- economic impact it has
in the region we should decide the fate of FDI in retail.
One should not belittle the government by completely writing of every
policy decision it takes. On the one hand Opposition accuse that the government is suffering from policy paralysis and on the other it
again oppose every policy decision uprightly. Rather than debating the
issue in parliament opposition seems to enjoy to block every move the government takes to propagate economic growth. Government should also
take opposition view in account while moving ahead with its decision.
Government should move ahead with FDI in retail on a pilot basis first
in selected 5-10 cities.Depending on the socio- economic impact it has
in the region we should decide the fate of FDI in retail.
The retail FDI approved by the Union Cabinet even without reference to the sitting Parliament is an act of sbjugating parliament and as best an arrogant move of the Government.India is on sold to the pressure of flailing Western economies.It must be stopped at all costs.The only way to do so is to distribute foodgrain (enough in stock to feed a little less than 1.2 billion mouths),500 gram per day per person by a central agency free.Let the foodgrain be in a category of 'unmarketable' commodity.This will cost 70 billion US dollars,will decrease malnutrition liquidate corruption in food dealing and corrupt PDS.This is the top priority for the aam admi.At the end, by decreasing malnutrition,national productivity will rise and billions spent in health and disease will be saved.Thus at the end of the day the free ffodgrain distribution will be revenue free.This will move 'roti' from the plate of politicians to the plate of aam admi.Therefore political will will not let it happen.
This is definitely gonna hike inflation and prices of all daily requires commodities. The economics of MMS and MSA has hurt us very badly.
Why are we so paranoid? Aren't we enjoying the success of India's liberalization? People who are writing negatives about the proposed FDI in retail not only hide facts but also lack self-confidence. Political parties make false propaganda to galvanize support to gain short term political millage. India is a biggest success story, world envy our growth. Be it banking,insurance,software, telecom or automobile; Indian companies continue to dominate in spite of the presence of MNC giants. Every single new entry which is of most important to modern India was opposed by certain section of India. Mobile phones,traffic signals, computers in govt offices, foreign media,nuclear energy and so on. But,what is the result today? Same people who opposed these new entries are enjoying their benefits. Today I do not find any communist leader not using mobile phone or their party office without computers ! But if we listen to these section of people's argument,they will take us to iron age civilization.
Professor Chandrasekhar is to be commended for his article on the FDI. India is a very special case and still under-developed in several sectors and allowing the huge multi-nationals into the retail sector is attractive only for the urban masses who will drool over the imported products. This will not serve the entire country well as the small self-employed sector will be wiped out in the long run. Globalization is a hollow mantra that will not suit all the countries, this is only a form of colonization. Many Western countries subsidize their agriculture and industries. When a certain product is over produced they destroy them, this has happened with milk and cheese production.
India is a huge market and the western supermarkets want a cut of this pie, they have ignored India for decades and suddenly they have discovered that they can make a huge profit in India. To say that they will provide 10 million jobs is a fantasy. Coke and Pepsi have already killed the soft drinks !
The views expressed by the author seem to be one sided. Though the apprehensions put forward by the author are quite accurate, he has neglected the benefits of the move. Being a liberalized economy, India has to open its doors to foreign players. It is a two way road and just as the Indian IT companies have benefited from other countries, India cannot deny similar opportunities to the foreign players. We can take examples of the countries where the foreign players are thriving side by side with the local players in the retail sector.
Why is India going to rely on foreign retailers to come in and improve the distribution system and build all the warehouses. We must first make our organized retail sector strong enough to compete with these large foreign retailers. Our domestic retail chain can also do the same as foreigner's will do and they can do even better as we have done in few sectors like our financial institutions are well placed and regulated than those of western. In long term our position will be like US, they cannot survive without cheap Chinese imports. These foreign retailer will do the same. To improve their margins they will import cheaper Chinese goods and this will ultimately bring our own domestic sector in weaker state.
The Hon. Minister for Trade and Commerce Anand Sharma has since then clarified that the 30% sourcing from SMEs has to be from India alone and the earlier one was a miscommunication from the Cabinet.
If FDI in retail is so beneficial to the aam admi,why did the UPA govt,keep quiet when food inflation was sky-rocketing till recently ?
FDI in retail will affect local retailers to some extent. However, the local retailer still has the advantage of low rents, smaller capacity, and local flovour. Even now when there is no FDI in retail there is domestic retail chains, how much have they affected the local retail chains? Even in the developed countries, small retail shops are thriving because of their low overheads, and fresh inventory, which larger chains are not able to match up. Big retail chains benefit from economy of scales, which help them keeping the prices low. Consumers benefit when they have the choice to either go to a shpping mall or a local retailer. Big retailers also buy directly from the producer, which provide incentives to small manufacturer to produce more that too with an easy access to cheaper credit. China's small producers have benefited from the international retail, why are we waiving away this chance to make our manufacturing community stand upto bigger challenges?
Govt decision of FDI in Retail would further 'deepen' our crisis in longer run. 'Create a 'pseudo-thesis' (of creating more employement, keep inflation in check etc) and 'pay' to popularise it' is been the mantra of Indian corporate - political system. PM's statement of 'decision left to states' would only give 'state law makers' a chance to pocket big 'kick backs'.
Very good points against permitting FDI in retail. Few comments: - Concern about oligopoly will be relevant only if the current framework of retail is totally eliminated. If the new entrants try to pay less to producers and more to the end-consumers, won't they fail in winning in both the ends, since no producer will sell it to the new middlemen and no consumer will go to them? - Also, one of the main concerns in the current supply-chain system is that there are too many middlemen between producers and end-consumers, thereby resulting in poor efficiency as well as poor margins to the real producers and higher prices to end-consumers. Won't having large middlemen reduce that overhead? I agree, that will result in eliminating jobs and livelihood of people in the current supply-chain. To be honest, I have no answers yet to how to solve that issue by providing alternate skills and employment to them, though, no overall good things come without pain.
I agree with the author about the impacts of big retail chains. So, should we protest against 51% FDI in these big retail chains or the original concept of a big retail chain. Put in other words, wouldn't a retail chain with 49% FDI be as worse as a retail chain with 51% FDI? I hope someone's answer will thrust me out of my ignorance. Or the current opposition to 51% FDI is just a charade to protect the super rich Indian businessmen like Mittal and their clan who would lose their controlling power in these entities.
Prof. Chandrasekher is praying at the altar of the culture of poverty. India will need to move on to better procurement and distribution policies, especially for perishable goods. Starting with about 50 localities is the best way to demonstrate what can be accomplished with better practices. The country can then learn and respond to contemporary practices. It is time to wake up to the realities of global trade.
Dont try to spread fear pshchosis. Our country is too big to monopolise by few retailars. Perhaps they may open few stores in Metros and Towns. Still there will be lot space available to the existing retailers. Let new capital, technology and management technique come and compete in our market, it will give our retailers get a chance to update themselves. We have lesson learnt in the case of Industrial opening up. Our industries survived and strengthened. Now they attained confidence to take over large multinational companies. Dont forget we have our own big retailers like Big Bazzar and Fresh. We have Lulu, Choitrams and many other Indian retailer operating internationally. They are as good as TESCO and Carrefoure in their operations. There is nothing to panic like what some people try to depict. Now India is strong economy, and our democray has the strenthh to deal with situations goes wrong.
We have seen the effect in soft drinks segment where all of the local brands were wiped out in 10 years.
Whatever gets us rid of the moody, arrogant, unaccountable local shop owners!
LFRs - Large Format Retail chains - have been around for some time now, and have completely failed to make a dent on the retail landscape. 1) Size of the Indian Market, which makes full coverage nearly impossible . 2) It would require each chain to set up something like 5 - 10 stores in just one city like Indore to properly cover the city - extrapolate this number to India, and you have a massive investment outlay... this in a crowded market, with Reliance Fresh, More, Easyday, Big Bazaar etc all already having a significant presence 3) Large majority of consumers are 2-wheeled, and LFRs do not have conducive home delivery policies. This means that only people with cars can shop at these LFRs 4) Better service and faster response by small retailers to their captive consumers - home delivery, stock returns and changes, individual attention to customers, stocking as per their local customers needs and slower response time as compared to Chains. Remember Kellogs? They too misjudged India!
Thank you very much for providing analysis based on macro economic factors. I am wondering while Indians could construct, run and perform in excellent organizations and economically advanced countries, why we fail to do it for own country men? is it because we think the farmer and poor are expendable and they require no sympathy except lips talk. I wish You should have highlighted the manufactured consent that is going on with the Ad campaign of government which is trying project that FDI in retail will solve all issues of India such as food inflation, unemployment and glory to country; except death of 2.5 lakh farmers and likely plight of another strata of society known as hawkers.
This government is not contented with the suicides of farmers. Now it wants the tragedy to spread among the millions of small traders and petty businessmen and their families to starve and end their lives .What a way to address the population problem! A reform can be termed as a reform only when it ushers in improvement in the quality and standard of life of the entire population in an equitable manner and not by creating conditions that will create pockets of plenty when several millions are expected to live within 75 cents a day. On this test surely the master economist is a failed candidate in the reform test ,and the poor and underprivileged cannot hope to see the light of the day in his regime. It is unbelievable that our PM cannot understand the factors behind Occupy Wall Street movement that is sweeping the ' developed' USA ?
UPA govt decision to allow foreign entry into multibrand retail is a welcome one. This move would benefit the country in several ways. I feel it is a misplaced notion that foreign companies in multibrand retail would eliminate the neighborhood Kirana stores. As per announcement there are checks and balances that limit the number and location of the big box stores. Logistical challenges of traveling to a multibrand retail store would limit the number of people visiting such stores. Most of the everyday grocery needs would still be served by neighborhood Kirana stores. By implementing modern retail practices foreign entry into multibrand retail would limit the currently estimated 40% farm wastage and help fight inflation. Besides it has the potential to generate millions of much needed jobs. It will also allow better remuneration for the farmers by limiting the middlemen. In the USA, Walmart is known for low prices and that is helpful for the people more so in a hard economy.
India's retail trade is a success story in India. Why to disturb it for few lollypop short term benefits? Why to give control to rich overseas chains. Will Government be able to control such big international chains once control over them is lost and when they will start pulling Indian Government's arm? Answer is simle No. Why to get into this mess. Keep this new problem away from the beginning.
Why is there such an uncalled for opposition for a move which benefits both the producers and consumers? It is a well known fact that out of every rupee paid for purchases to the retailers,30% to 50% is taken away by the intermediaries owing to long supply chain and inefficiencies in the present system.In case of fruits and vegetable intermediaries knock of 60% to 80% of what consumer pays. The FDI in retailing certainly benefits both the producers and consumers and also helps in generating employment and containing inflation. Why then this clamour to support intermediaries when producers are bleeding and consumers are being fleeced?
The article gives a close analysis of the disadvantages of FDI in retail sector which are all reasonable. But the same has a positive side too…The farmers and small scale workers can reap benefits from FDI, if it’s implemented with strict guidelines to adapt to the world’s largest democracy.
Unfortunately we just can’t rely on that, because we live in a country where the terms and conditions are usually overlooked. Eventually, the MNCs will come out with deeper pockets and the ‘Aam aadmi’ struggling to meet the daily expenses.
It’s quite ill-fated that we have a government very much obsessed with the neoliberal policy. Yes, it has helped in escalating developments in countries like US, but in India, we have a different game. And don’t follow same rules for different games.
"As of now the retail chain works well, there are no noticeable shortages, and a large
and diverse country is well serviced."
I am amazed that you can make such a claim!!! Frog in a well, thats all I can say.
The people who loss jobs due to FDI are mainly the middle men.They should not be allowed to exploit the farmers and consumers anymore.More over the main problem with indian agriculture is farmers are not getting the exact prices and lack of modernization of farm equipments.The move will help in modernization, avoid farmer suicides. Moreover India has a population of 1.2billion so there is space for everyone.
India is SlumDog Colonized Residue country ruled by SlumDog purchased corrupt agents. You know what? India will be colonized soon and SlumDog Indians will see repeat of their colonial history under Babar and Lord Clive for 700 years. SlumDog India will be a multi-polar colony under Chinese and USA and EU (previous Master of Indians).
The argument against FDI in retail suggests that deep pockets can be
used to compete against small stores. Deep pockets itself does not
ensure success. India is a different place to the USA -- Walmart
stores in the USA are situated in the middle of nowhere; people
looking for a bargain flock there to buy household consumables for a
week or a month. I do not foresee Indians emulating that behavior. If
you are rich, why bother? If you are poor, will you travel 25 kms to
buy groceries, and will you have enough money in your pockets to stock
up for a week or month?
Any debate is wasteful when both sides are dug into positions for
political posturing and gain. But, that is the essence of democracy.
We will have the highest efficiency installing a dictator. The point
is that Dr. Manmohan Singh has finally grown a spine after 2 years of
meandering in UPA2. Future generations will thank this unelected
intellectual for economic reforms including FDI and subsidy cuts.
As the author says, this is indeed a rushed decision, without weighing the pros and cons. The reasons for this tearing hurry to push the reform are not explained by the Government. To add to the confusion, now the U.S. Ambassador has backed the decision taken by the Government. This is an uncalled for interference in the decision making process in respect of a domestic issue and explains the reason for the tearing hurry. Has Mr. Manmohan Singh given some kind of commitment to the US regarding FDI in retail trade? As it is now revealed, there is lot of opposition to the move within the Congress party itself. The Government, therefore, should not have ventured to make an important policy decision, without proper consultations, discussions and debate.
I read similar arguments back in early 1990s (in Hindu & other newspaper pages) about how Rupert Murdoch is going to mentally enslave Indians if Government allow FDI in TV media!! Left leaning JNU educated "economists" ranted abut dangers of a foreign controlled, mentally retarded, younger generation and an american cultural invasion led by Star TV!! They also ranted about how house wives will have to ask MNCs permission to use turmeric or Tulsi leaves for home treatment if India were to sign GATT agreement!! They later argued how Indian security will be threatened if we open up our telecom industry to foreign companies!! They said all these decisions will create more poor people and will lead to India's re-colonialisation!Now,After 20 years all these argument sounds stupid and bizare!I am sure after 20 years the above article written by another JNU "economist" will look equally silly! China, Indonesia, S Korea, and Malaysia allows FDI in retail- sky did not fall! Then why not India?
Why this cabinet decision NOW. Most of the 2G accused are getting bail. the 2G is going bad to worse.Even the CBI is charged of partisan charge sheeting. The energy of opposition is gaining momentum in Corruption issues,black money,Koodamkulam,and old Telungana issues etc .Now by one stroke of decision of few executives the energy of opposition is diverted. Even the tone of CJI is going soft in the case of Policy decision of government and says the courts interference should not affect government functioning. Who's is the brain behind of this dangerous decision?
The arguments against 51% FDI in multi brand retail have been well brought out. But the aspirations of the growing urban middle class have been totally ignored. 53 cities with population of one million plus is not the total country. Modern Retail Trade is nothing but an organised form of Sandai or Haat or Weekly market days which traditionally have been the back bone of the rural and semi urban economy. Modern Retail Trade would only bring about a qualitative change in products being offered besides hygiene which are totally absent in the traditional format and are a source for disease and misery to the gullible public flocking the markets for buying their requirements. As a nation we seem to be averse to organised working be it our personal lives or official work. Any attempt to bring in organised models creates a child like resistance.If FDI is opposed in the present globalised world why should Indian companies be allowed to acquire foreign companies and make their foot prints felt?
A fine and clear article. The questionable claims, that the author points out, seem to be not only from the government but also agencies like CII. I must also point out that the CII gen. sec. said it would provide jobs in the retail sector, such as logistics sector, contract labour in the distribution and re-packaging centres, housekeeping and security staff. Is that all we can offer as hope for the jobless? Someone loses their livelihood, their shop and everything and we offer them hope by saying you can work in the big retail shop as.. er... probably a security personnel? There is nothing wrong with working as security staff, but will those people really be happy? And is anyone thinking about the amount of distress it's going to cause to those changing jobs? What about the cost of re-training?
Professor is ignoring one thing. Much of the food and condiments like gerkin pickles, tomato puree, jalapeno salads exports of india are done same market chain that he is opposing. Perhaps he must also study the food export market. Its a one sided article determined to oppose the decision.
Why only 30% in-sourcing for FDI. why not 100% sourcing? All the remaining 70% sourcing will be got from other places ruining the livelihood of Indians. This is the worst government ever possible. We have a prime minister who worries more about gdp(which are basically mere numbers) than farmer suicides.
What is the nessacity to invite the F.D.I in retail market,the people are not facing any difficulty in getting consumer,durable goods,and vegitables.At present the people are facing many burning problems,such as unemployment, price rise, curreption,black money.Fistfall,the govt should take the measures to improve the purchasing power of the people.than think over of invitting f.d.i in retail market.
How long we have to buy from Nadar and chettiar kadais / shops ? They are mostly selling poor quality products at a higher price and the brokers make money ... the farmers and the end users are not getting the value of their money / produce.. This cannot go long.. indians are visiting all over the world and this Foreign direct investment is imminent as we have money to spend for the quality shopping.
An article written with a very pessimistic and communist view point! Two lot are going to benefit from this decision. The farmers who would get better prices for their produce and the common man who would get better products at competitive prices. Losers? Day time looters or middle men who are doing retail business in India at the moment!
Prices of vegetables have risen by 27% and that of egg, fish and meat by 11% over the last year. 25% of the vegetables produced never reach the market in India. And you still feel the retail system works well? The price rise in perishable goods can be controlled if supply chains are improved.Even if the net effect on employment is negative, is it a fair to force the entire country including the poor to pay higher prices for food? Better supply chain would increase the revenue(P*Q) of the farmers. Even if the price increase is small there will be a definite increase in quantity sold by farmers(25% of the produce does not reach the mkt today). Organised retail is being allowed in 51 cities. Even if big players corner the markets in these cities, you conclusion that agricultural market would become an oligopsony is a huge leap of faith. What about the procurement for retail by traders from rest of the country. Finally,organised retail means higher tax revenue and less tax evasion.
Foreign companies will target creamy layer of population & not 70% rural neither slum dwellers in cities. This FDI will in no way benefit villages-FDI will get invested in our cities and not in villages & the supply-chain investment by these companies in no way implies direct benefit to farmers. Plus as author cleared SME will face competition with Chinese products. So, gap between rural-urban divide is bound to enlarge and it will add to rural distress.
Solution I propose is, While we cannot avoid FDI's inevitability in Liberalised India, we should force government to commit itself to equivalent investment from govenrment side in our Mandies, PDS, FCI storage and connectivity to rural areas to keep balance between growth of cities & villages. FDI will go in Urban center, Government should look after small towns and villages through comprehensive plan and institutionalised transparent scheme. Govenrment cannot run from its responsibility of Inclusion, Hindu should highlight it.
The article misses some of the data related to middleman and inflation. In India the farmers and producers get only 30% of the price paid by the consumer where as it is around 60% in devloped countries. We have in India about 4 to 5 levels of middleman between consumer and farmers/producers. Most of the employment mentioned here in retail sector utilize child labor.
We need an article to balance the negative views on the subject expressed by this writer. The Press should not always toe the official line of the Government. At the same time it should not also become an echo chamber of its opponents. The readers are too smart to spot such a trend in a newspaper and over time they would discount all opinions expressed in a specific paper saying "that paper always prints anti-X views. Don't believe it". Whatever that "X" may be. Somehow, I do not believe the GOI, with Dr. Manmohan Singh explicitly supporing it, would callously let loose a diabolical scheme to ruin poor farmers and traders of India, as this writer makes out the Retail FDI scheme to be. So the question is what is this writer NOT telling us?We never get tired bragging about our software giants capturing the US markets and bringing back the loot in the billions of dollars. Why do we then put barriers when foreign companies want a small piece of the pie in return? When we can dish it out we should be able take it when they dish it back. If we want to play in the adult league we should make it an even field for all or accept defeat and get out of international trade.
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