India has buckled to outside pressure by allowing in the multinational retailer — the only beneficiary of this move
For U.S. President Barack Obama there could be nothing more cheering. The ‘underachiever’ now goes to the presidential polls with a lot of confidence — India’s decision to open up FDI in multi-brand retail comes as a shot in the arm for the beleaguered American economy and will obviously boost his poll prospects.
Mr. Obama certainly knows what is good for the U.S. economy; Prime Minister Manmohan Singh also knows what is in America’s interest. Mr. Obama, for instance, wanted to stop outsourcing to protect U.S. jobs. No amount of persuasion from India changed his mind. Similarly, knowing how important FDI in retail is for him, he had pitched for a new wave of economic reforms. It was surprising to see Mr. Obama telling India what is good for us.
Aided and abetted by TIME magazine and credit rating agencies like Standard&Poor’s, Fitch and Moody’s, India finally buckled under global pressure. What is little known is that India was also under a G-20 obligation to remove all hurdles to the growth of multi-brand retail.
But is FDI in retail really good for India? Will it improve rural infrastructure, reduce wastage of agricultural produce, and enable farmers to get a better price for their crops? While a lot has been said and written about the virtues of big retail, let me make an attempt to answer some of the big claims.
Agriculture: The Prime Minister has repeatedly projected FDI in retail as a boon for agriculture. Unfortunately, this is not true. Even in the U.S., big retail has not helped farmers — it is federal support that makes agriculture profitable. In its last Farm Bill in 2008, the U.S. made a provision of $307 billion for agriculture for the next five years. .
Where is the justification for such massive support if big retail was providing farmers better prices? And let us not forget, despite these subsidies studies have shown that one farmer in Europe quits agriculture every minute.
The second argument is that big retail will squeeze out middleman and therefore provide a better price to farmers. This is again not borne by facts. In the U.S., some studies have shown that the net income of farmers has come down from 70 per cent in the early 20th century to less than four per cent in 2005.
This is because big retail actually brings in a new battery of middlemen — quality controller, standardiser, certification agency, processor, packaging consultants etc. It is these middlemen who walk away with the profits and the farmer is left to survive on the subsidy dole.
Monopolistic power enables these companies to go in for predatory pricing. Empirical studies have shown that consumer prices in supermarkets in Latin America, Africa and Asia have remained higher than the open market by 20 to 30 per cent.
And finally, the argument that multi-brand retail will provide adequate scientific storage and thereby save millions of tonnes of food grains from rotting. I don’t know where in the world big retail has provided backend grain storage facilities?
FDI is already allowed in storage, and no investment has come in. Let it also be known that even the 30-per-cent local sourcing clause for single-brand retail has already been challenged and quietly put in cold storage by the Ministry of Commerce.
Employment: The Indian retail market is estimated to be around $400 billion with more than 12 million retailers employing 40 million people. Ironically, Wal-Mart’s turnover is also around $420 billion, but it employs only 2.1 million people. If Wal-Mart can achieve the same turnover with hardly a fraction of the workforce employed by the Indian retail sector, how do we expect big retail to create jobs? It is the Indian retail sector which is a much bigger employer, and big retail will only destroy millions of livelihoods.
State government’s prerogative: Very cleverly, the Central government has allowed the State governments the final say in allowing FDI in retail. This may to some extent pacify those State governments opposed to big retail. However, the industry is upbeat and knows well that as per international trade norms, member countries have to provide national treatment. Being a signatory to Bilateral Investment promotion and Protection Agreements (BIPAs), India has to provide national treatment to the investors. Agreements with more than 70 countries have already been signed. State governments will, therefore, have to open up for big retail. Industries will use the legal option to force the States to comply.
And more importantly, let us look at how the virus of big retail spreads, even if the promise is to keep it confined to major cities. Recently, a New York Times expose showed how Wal-Mart had captured nearly 50 per cent of Mexico’s retail market in 10 years. What is important here is that as per the NYT disclosure “the Mexican subsidiary of Wal-Mart, which opened 431 stores in 2011, had paid bribes and an internal enquiry into the matter has been suppressed at corporate headquarters in Arkansas”.
In India, we are aware that Wal-Mart alone had spent Rs.52 crore in two years to lobby, as per a disclosure statement made in the U.S. It has certainly paid off.
(Devinder Sharma is a noted food and agricultural policy analyst.)
Keywords: Wal-Mart, FDI in retail, UPA government, Commerce Ministry, Obama, U.S. economy
I agree with the writer's assessment. The cleanup of the current
system which is proliferated with corruption and uneven distribution
of profits can be changed with FDI if the multinational companies
change these middlemen/women Completely. And as the author factually
states, in the past the MNCs have been known not to help the farmer or
agriculture but to take over and control methods of distribution of
food which ultimately leads to predatory pricing.
The ideal that all MNCs live up to is profit and more profit, it is
hard to imagine that they will actually make and effort to help the
farmer.
I think that if the government of India puts very strong regulations
for these MNCs this might work, but then when has it been difficult to
'buy' a regulator...?
FDI is good for India. Bad for small business. But there are so many business that rake in a lot of profits. They in turn dont pay an iota of tax. With big businesses coming in, India will get a good portion of the tax from these transactions.
Now, what the Government servants+ bapus will do with the dole is another thing. Hopefully, by the time big shops take over, we have reduced the corruption to just higher levels.
This is a biased analysis to begin with when the author starts with labeling President Obama as 'underachiever'! What is the basis of such ill-informed and sweeping statement? The author goes on to making further mis-analysis by comparing context in the US to that in India. It is well documented fact over 30% farm produce is wasted due to lack of infrastructure and then farmers get a pittance for their produce from the middlemen traders and then they turn around sell to the public at an inflated price! These middlemen are the blood sucking leeches who adds no value to the system other than gouging the public and adding to the inflation. In the US discounted stores like Walmart softens the blow of recession with their low prices. BTW, Walmart sells mostly goods manufactured in China (and India too) as opposed to the author making outlandish claim that FDI in retail in India would somehow be the 'shot in the arm' for the beleaguered US economy! Talk about hyperbole!
Major advantages -
1. Farmers will be able to sell most of their produced crop. Most of the farmers have to throw away nearly 30% of crop due to middlemen's games. So even if they get less rate, their ability to sell more crop will make their lives better.
2. Quality of crop will improve. Farmers will be educated about the required quality.
3. Distribution system will improve. Minimal loss of produce. Look at the government storage rotting away the pulses. Govt can never generate an efficient transportation and distribution and storage systems for food. It has to be private enterprise.
4. Walmart is just another player like Reliance, More, Spencer, Big Bazar, Vishal Mart etc etc
Negatives -
1. Lot of mom and pop stores in cities will vanish but some of them will find jobs in new organized retail sector
The author is only looking at negative aspect of the issue.
Well poverty in America does not hit jobless people that bad. Cause the currency of america is valued very high though artificially. Also secondly the government spends enourmous amount in providing free eduction to people. Which reduces the burden on average people. The family values in america are not same in india. Definately the FDI in retail is going to hurt lot more indians and benfit a few. So thats why we see both direction of arugments. If everyone over here think our corrupt government is doing this for benefit for people. They always do for their own benifit.
More than 50% of produce in India gets wasted due to lack of storage
facilities and bad roads. Government will never be able to build this
infrastructure. The poor small farmer gets 1/10th of the cost of the
retail price, if at all that. This seems to be a good solution.
The writer is calling the US President an under achiever in the first
paragraph, I feel he is too opinionated for me to take his words at
face value. Personally i will go for the words of an honest to
goodness Journalist especially from such an esteemed publication as
The Hindu, who does fact based reporting and does not show his
political affiliation in his column. Thanks but no thanks.
Good analysis, the argument of the author seems correct. Govt hasnt
given any details about regulatory authority for retail business. And
just hope foreign retailers don't hold India in their interest.
Educating people may help us not too dependent on these retailers.
This is a stupid analysis - Blaming US for problems I thought went
out of style with 1980s, when 1991 Saddam Hussein invasion of Kuwait
(loss of Keralite remittances) - forced India Govt., against its will,
to make economic reforms.
And India got nearly 20 years of > 7% growth, for the first time.
Made in USA, no doubt.
btw, India imports Far far more from China, than from US, which
actually imports more from India than it sells back.
i completely agree with the author. question is why is media keen on
calling it 'reform'. what wrong has been set right? the only 'reform'
the country needs is a judicial and bureaucratic reform. once people
will get timely justice and administration will function transparently
things will fall in place. steroids help to win races (elections) but
are always detrimental in the long run.
The author makes very good points for why the U.S. should completely stop outsourcing all IT work to India. Trade is a two way street.
Like it or not beggars can not be choosers. The Indian currency has collapsed and so too has the economy if only one has the courage to admit the reality of present day India. What the congress has done any other party who are clamouring for it's head would have been doing the same thing.True ,they have looted the country.
Wonderful article. Nicely articulated and explains well, all that is wrong with FDI in
retail.
My opinion, as a customer I'd certainly be benefitted, no doubt about it. But what
about people losing their employment.
More than half of India is self-employed, we have to take this fact into consideration
before making any such decisions.
What applies to one country might not be true at other places.
At last, one realize that world has indeed become a lobyist place. All the lobbyist must
be having a wonderful weekend bash at this decision and the coffers of our
politicians must have started overflowing. They, my dear, are the real beneficiary of
FDI in retail.
writer did not mention China where local shops and retailers also do good business
along with Walmart and other supermarket giants.Farmers and local shop keepers will
loose their business is a false notion.
Better not to be in protectionism.in a broader sense this will create an efficient mechanism to bridge between production and consumption. it might create a proper market for many products across the country which increases consumption which goes along with increase in production and hence improves the economic activity.it may not create many direct jobs but one must not forget the indirect employment going to be generated by an increased production activity in almost all consumer goods sectors. only thing government must take care is about imports. there is a high tendency of these retailers to import the goods from countries like china since they are cheap there. an increase in import duties on consumer goods might solve it.
By opening up FDI in multi-brand retail, Manmohan Singh is implementing the India-US Agreement on Agriculture and Science and Technology on July 18, 2005. This agreement was the genesis of the Knowledge Initiative on Agriculture (KIA). Later, in March 2006 Singh and Bush signed a joint declaration on enhanced cooperation in agricultural education and research. This cooperation is based on the KIA. The KIA is implemented through KIA Board, which consists of US and Indian members from government, universities, and the private sector. The US private sector members are: Monsanto, the largest seller of GM seeds in the world; Archer Daniels Midland, a US grain purchaser and trader and is, with Cargill, one of the companies that maintains oligopolistic control of the American food-manufacturing and food-processing markets; and Wal-Mart,world's largest retailer.
Indian PM is doing a favour to the US at the expense of welfare of Indians. What can you expect from a former IMF person!
Everyone who is not happy with this article, please read 'Naomi Klein's 'The Shock Doctrine'. The decision to bring in FDI in retail is something which we will all regret 15 years later. There must have been a lot of greasing (52 crores from Walmart alone ! as reported in the article) and lot of arm twisting by WTO/World Bank/IMF who are most benefited when countries open up to global economic giants !
Very naive article indeed. The primary subsidy the US government gives to the farmers is to let the farmers NOT cultivate their fields in order to protect prices. This is not due to the big retailers but because the supply far exceeds demand as the US farmers increased yields tremendously. Of course eliminating middlemen will reduce prices. We see this already in shops like Reliance Fresh. Investment in infrastructure like refrigerated trucks and storage facilities and efficient logistics are other benefits that we can expect.
What happened to the local cool drinks fate will happen to the retail stores in India. Initially it will be more cheaper to buy the products from Walmart and also farmer will also get higher pay. After they demolished all the retailers, only walmart will decide the price and consumers will be forced to buy from their. Definitely the consumers will not get the fair deal. They are not coming to India for helping us. They are coming here for their own interest. But they are not donating the money to indians. Remember they are investing the money for their future earning. Finally the money will go away from India. It will not benifit for long time for india.
Let's give it a try and see. If it really is harmful, and reports
eventually say so after a few years of running, we people are here
anyway, and if we decide not to buy from them they cannot run their
stores. But, such a collective will can be generated only by real
loyal people, people loyal to the country, real loyal media who is
loyal to the people and truth, and real loyal leaders wo can mobilise
the public against such giant forces. Once international multibrands
have spread and even if found bad for us the people, it will take many
hundreds or thousands of lives, bloodshead and protests to make that
correction. Also, by that time the change is made our ability to run
retail by ourselves may be lost because all our people will be knowing
only how to keep accounts and carry goods, not run shops.
When comparing, coming of computers may not make best analogy, because
that was a product and technology, FDI is none, its investment which
takes away profit. Still, lets give it a try.
Indians who have lived overseas will be aware of the impact that these maltinationals could do to the local Economy.Please research this in depth before you slit your own throats.At the moment for India it's Penny wise POUND follish policy.Once established they will have a strangle hold on the LOCAL SCENE both politically and economically via their economic muscle.£500 million pounds is petty cash for these giants-to spend on lobbying the politicans and the media.This is the reality.Once established they will determine What is bought and from whom and at what price for now they will be the only major outlet.The WORLD is their source.Most if not all the items sold in these outlets will be made in China (common feature in most WESTERN shops today)See in what mess they are in today.China will benefit at India's cost.The world's largest shopkeepers are coming NOT for India's good but to make profit.China can afford this as it's the world's workshop.They have trillions of dollars as res
Just spent an hour yesterday pouring through all the bytes on FDI, when we had at
apartment door a 10 year old boy delivering groceries that we had ordered. As always
without a receipt. The shop is a good mish-mash of imported dates,mueslis along with rice,
daletc in open sacks. A well fed cat scurries around and given that we have never seen it
fed cat food,we have a sneaking suspicion that it is able to find rodents amidst the pile of
groceries sold. I have not yet touched upon the other underbellys, of middle men, squeezed
farmers, rotten veggies....
Which brings to us to the question, what are we trying to protect? And what is so horrible
about the Walmarts?
Retail-Gate coming soon! LoL
The argument in first paragraph is so weak, that i was not able to
read anything else. Indian companies like Reliance have not been able
to create a successful business model for retail in Indian. Why do
people assume that Walmart is like evil super villain, who will conquer
the retail market in India. Walmart itself has a net margin of 2-3 per
cent. It wont be able to make profit in India with these restrictions.
And government has provided so many safeguards while allowing FDI in
retail to protect the local kirana stores.
Neverthless you write as if allowing FDI in retail in India will lead
to revival of Indian economy in 2-3 months, leading to re-election of
Obama ???????????
In battle for pulling even the government does not admitt the real
reason for need for FDI. Indian logistics industry is one of the worst
in the world. We waste around 40 per cent of our food produce. For a
country which has to feed more than one billion people, this is simply
not admissible.
I am happy that India has opened up the FDI in retail stores. Reason being, that 1. It will help people to get qood quality produce at a cheaper price 2. It will make the pop and mom shops to go away but not immediately. It will take time.
I understand that these small pop and mom shops survive and it has given lots of people opportunities to make money. But, unfortunately these guys do not pay taxes, they do not have receipts for anything they give except a small chit they write and give. The quality of goods they sell is not on par and even in America the Indian stores that sell Indian Groceries keep all expired goods in the shelves and sell it. People who do not look at the expiry date tend to go by surprise. This can be eliminated.
There is good and bad in everything and I totally understand how it will take away these small shops, but on the long term it would benefit consumers and people. Please, welcome this.
I may not accept the idea 100% but I'm not totally against FDI
entering Indian market. I think healthy competition will be good for
the end consumer. We never know tomorrow if the local retailers
(kirana shop keepers) can come together and build their own mini
walmarts in their areas and they might as well be successful in
kicking walmarts out or atleast off their territories. It may so
happen that we enjoy the benefit of both the worlds. We never know,
only time would tell us that, its pretty much wait and watch for now.
The only thing I would like to see and buy in the Indian walmarts is
MADE IN INDIA as much possible.
On what basis is Mr.Devinder saying that India’s decision to open up FDI
in multi-brand retail comes as a shot in the arm for the beleaguered
American economy?
American voters care less if 3 or 4 walmarts or targets are opened in
India before November.
I welcome this decision. It is an absolute disgrace that we have so
much starvation and poverty in India yet 40% of our food supply gets
rotten before it reaches the store.
Why should FDI be the only way India grows? We are facing the same situation we
faced when kings ruled our country. We were rich, we were excelling in business, we
were organized in trade within the country and overseas. But when East India
Company in form of an FDI set foot, we went haywire. Isn't it time we became self
sufficient on the food front? With large lands and rich resources, why do we blame
the global economy for our lack of discipline in ensuring self sufficiency? We don't
need the support from outsiders for something which is in abundance in our country.
Technology, Automobiles etc could be some sectors where FDI can be allowed. But
why retail and food? India in its pursuit to satisfy global demands might end up
suffocating its own resources. Beware!!!
In the USA I buy a lot of products made in India.
Should I stop buying these?
Please don't call these kind of people policy analysts. According to the author India
allowing FDI in retail is going to boost Obama's election chances. Where does one
come up with these kind of arguments ? There are less than 50 days left to election.
Is the author trying to say that in these 50 days US economy will get a "shot in the
arm" by investing in retail in India ? What a bunch of croak. Sorry to burst the bubble
but India allowing FDI in retail is not even in the top 10,000 concerns of voters in US.
So who is forcing anybody to buy anything at any store? Whoever provides the best deals deserves to win the customer. It seems that the days of hiding behind cartels, shady pricing regimes and controlled competition are over. At the very least there will be some standards and quality controls with these foreign retailers. Our retail outlets are nothing but rip offs, making the black market grow. They had 60 odd years of protection. If they cannot take on global competition, let them sink. By the way, I do buy directly from farmers whenever I can. That choice is not going to go away for any reason.
Ridiculous argument. Apart for a few points, I fail to find any
convergence with the authors view points.
--> How on earth will Retail Stores store food grains? Doesn't the
author know that Retail chains buy food in massive quantitites and
employ warehousing facilities to ensure adequate stock levels
throughout the year? Case-in-point: The author should visit a Behind-
The-Store warehouse of Hypercity in Malad, MUmbai.
--> The author ignores the domino effect to other industries. The
logistics industry will receive great stimulus, apart from shipping,
agriculture, Exim, Infra, Technology and Services to name a few. Thus
leading to more employment
--> Has the author read every trade agreement with each and every one
of those countries?
--> The Opponents to this policy think that getting FDI into retail
would be harmful. Do they forget that 49% of the investment would
still be Indian?
The article is well written. How the family system has collapsed over a period of
time in USA and people have been made to depend on government for survival
especially in post retirement stage is to be studied and our mass should be
educated. The main culprit in the westen system ' no savings ' by the families.they
believe in trading of shares to make money. When some body makes profit in
shares, some body is fooled and robbed. The value of the share and and the worth
of company is always manipulated to deceive the public. The profit comes with a
sin only. Also the fellow who toils to generate assets do not get any benefit by
these middle men /these brokers who become rich. Perhaps it is the will of god to
make indians to suffer more for failing to distinguish between good and pleasure
Same story what i heard in 1991 that coca-cola and pepsi would erase bovonto and torino. All those who were worried about torino and bovonto at that time are happily having coke and pepsi. Infact Bovonto is still raking in smaller towns and villages. Same would be the case here too. Those who oppose this (read as BJP) would revel later on these reforms
Very ill written article. How can you compare India with likes of
America and Europe? Look at population difference, growth difference.
When malls opened up in India, i remember people protesting. What
happened? Malls in America dont employ people to operate elevators, no
employment for parking people, no employment in security guys. In India
they do. So spot the difference.
I don't agree with the author. FDI in India primarily helps India bringing competitiveness, infrastructure improvement, choices to consumer. US also gets benefitted.
This is like outsourcing which is currently benefiting US companies primarily and then Indians.
Small retailer comprehand that their time has gone. Till now they are running alone in race, now hey have to compete with others in the race. small retailer should hone their skills to compete with the foreign players. now they can not sit relax that the customer will surely come to them and farmer sell their produce despite their arbitrary selling and buying prices.
Simply great article. Couldn't find such a beautiful analysis with data anywhere. Congratulations to "The Hindu" for such a wonderful article. Only a handful of population will be in favor of FDI in retail and that's also because they see their personal benefits of getting more job opportunities and other benefits. This class is very selfish in nature and they really don't care what will happen to the rest of the country.
This will kill small shop owners .Anyway why we need foreign retailers
here why don't we encourage indigenous one . Fact is that our local
retail market is not mature like in USA .This is simply kill the
competition and they will maul local retailers and shop owners .
Before taking such decision can one tell me how many Indian Retailer
will go in say US or in Europe and set up a shop , No One.There is no
symbiosis in this relationship .We should have wait till our home
industry matures .This is purely leaning towards one side ...
Today America needs India more. India is a huge market for them to revive their failed economy. American companies will sell their third class products in India and siphon all money to America. What ever happens to India and People of India is not a matter of concern for Americans and even our corrupt politicians. Tell me name of any single politician who has slept single day without food??? It's high time we Indians should take politicians to task and work for betterment of Indians and not outsiders who are only interested in earning from India. They care a heck about India and Indians.
I find it strange that most arguments for and against the move to allow FDI in retail miss an important fact.
Okay, we all agree that FDI/Walmart is bad and all reasons advanced are, with out doubt, valid.(profit motive, no help to reduce waste, destroying jobs, driving mom and pop store owners to desperation and suicide)
If organised retail is bad, it's bad whether Walmart did it or Reliance did it.
Reliance and possibly several more are just waiting in the wings to expand aggressively or move in , in the next wave of two digit GDP growth.
Is it the argument that Indians prefer to be screwed up only with Indian Capitalists and have an abhorence to Walmart and likes?
Don't tell me it's all about Capital and only FDI can meet it-no sensible person buys that.
Next growth face may see probably "Retail" IPOs of INR 500 billion by Reliance going whole hog into retail, with public money and no real participation.
Again don't tell such entities would be owned by the Indian Public!!
Same routine invalid argument.
What I can't understand is, to benefit the local stores does the
columnist wants us to buy at higher prices ? I can't pay more to benefit
someone. I will buy whoever gives me good price and good quality whether
it is local store or MNC, I don't care.
I feel that, the author have given the true scenario which will be
seen soon due to this FDI retail for foreign companies. The major
concerns are employment of millions and the farmer's crop price.
There is a lot hope for good quality of retail shopping due to this
but at the same time how many of the people are able to afford that
quality is a big question mark.
The plight of the many people like owners of small grocery shops, Thelawala will be miserable. The same thing happened after the indusrial revolution. Many artisans, weavers starved. The people who argue that it will be like allowing computers in the Indian market. Has the grass root people of India benefitted. The changes that has been brought has benefitted the upward mobile educated families only.Coupled with corruption at all levels the rich are getting richer and the poor poorer.Corrupt people are accumulating money dispropotonately and scam after scam are occurring just below the nose of the people who are supposed to rule and govern.Farmers are committing suicide, this is the picture.The vision of our martyrs has gone in vain.Our politicians dreamt of hanging the blackmarketiers from the nearest lamp-post though failed to implement it. But our present day rulers do not even dream but say that it is the compulsion of coalition government. What else could we expect from our rulers
Let all middlemen crooks and those they bribe go jobless and die (they have adulterated and looted enough to feed their generations) so that 95% Indians can pay far less and get much better quality products. When Walmart employs only 2.1 million against 40 million for the same turnover, IT IS CLEAR that it is getting rid of almost 38 million middlemen crooks and passing the benefits of lower price to the consumer. It is because of the low-life analysts who are bribed by the crooked businessmen, the Indian consumer is looted.
Are we going to ban small retailers or kirana shops? No
Anybody will be compelled to buy only from Supermarkets ? No
Any farmer will be compelled to sell only to Walmart or other Multinationals ? No
We have absolute freedom to decide where from we should buy or sell!
Then how come these policies will affect us negatively ?
Beleive our Hon PM who has changed India by his policies for the last 20 years .
Most of products that Walmart sells off its shelves are made in China. If the Congress government wants to bring in Big Retailers into India, why not directly discuss with the Chinese and have them supply directly into India rather than having Walmart as the "Middle Man"?
If history is an indicator, India ought to know "Flag follows the Trade". This is what happened when British followed the Dutch with East India Company over 350 or so years ago. India through corrupt politicians and their cronies business people caved in by the pressure from the U.S. Walmart is notorius for its switch and bait strategies - offer low price to chase away competition and raise price thereafter. It is a shameful dau in India's history.
Why did the colonisers come to India from far away lands? Wasn't it for selling their wares
and looting our resources to be shipped abroad? Didn't they stay back and become our lords
and masters? Our economist Prime Minister and his adorers and supporters would do well
to brush up on their knowledge of history.
.
Indians ridicule at first and then line up soon when they realize its
great..
FDI in retail is needed, it will bring in efficiency to the
system..MMS/UPA did the right thing..Devinder sharma is from the IAC and
a known UPA baiter...
Retail in India is only going to reap benefits to country.
It is shocking to see that such a noted food analyst is comparing Indian retail with American retail industry. Both countries have different market, and customer buying behavior. Indian customers psychology will play a vital role in success or failure of retail.
It should be left with the time how such reform will shape in coming future
The author is right in explaining certain aspects of these FDI decisions taken yesterday. Cheers to him for the dissenting voice. All seem to be forgetting another decision taken yesterday on 49 % FDI in Insurance. Very difficult to understand logic for this. However an additional point against inward FDI.One dollar is at present Rs. 56. As per PPP (purchasing power parity ) estmate by United Nations one dollar is Rs. 20. For foreign company it is very easy and profitable to buy into an Indian company. If they bring in 1000 dollars into India, actually as per PPP , they should get only Rs. 20000/- worth resources to deal with. But they will get Rs.56000 worth resources. So India gives them a benefit or profit or charge of Rs. 36000 immediately for bringing 1000 dollars. And then they earn profit every year on this 1000 dollars. What an irony and exploitation of Indian citizens?
Even if it is argued that big investment will help organize retail business, especially in food and farm products, and thereby benefit farmers, why do we need FOREIGN investment? FDI in retail business might create an illusion of benefits for very short time, but the foreign investor will almost certainly do Bait-and-Switch operations and LOOT US. Also, why is everyone blind to the wonderful work being done by companies like Amul, Mother Dairy, Safal, in retailing of farm and dairy products?
It is an irony that inspite of so much developments and advancements in India, now we require help of western corporates to run grocery and vegetable shops here.No rocket technology is required for this. Even our own business companies can do it here. No need of inviting giants like Walmart. May be this is a bailout package for Obama on the eve of his election. Dr MMS, our CEO, is making a Harakiri for the sake of Obama.Pathetic!
Already lot of indian retailers into mult-brand. Number of mom and pop shops will be reduced and ther will be growth for
lot of big indian retailers into the market.
There is a chance that walmart will struggle to capture indian retail market and will have to buy indian retailers etc
to capture the market first. The indian retailers will give good fight till the end and there can be indian retailers
appearing in USA and Europe market like Aldi.
In USA I see there are many mexican vegetable marts without the same great quality control and without the same air
conditioning like other stores and are having their own niche market.
The Indians with good heart and tradition wont give up farming for quite sometime but may do eventually.There is always
part of the human which will long for freedom will go back to roots. I am sure the Indian swamijis who help people in West will
help indians too.I think it will make people more spiritual when they get everthing cheap except a decent job
Devendra Sharma's observation&comparison of WAL-MART&INDIAN RETAIL should make INDIA think collectively to make a choice;both are 400B$ business but Walmart employs 2 Million and INDIA employs 12 Million.Does that mean in india people work less&earn less or are they less efficient?How many of the 12 Million are directly involved in retail?Finally what comparison are available in standards of both quality,availability.While there cannot be only one efficient system the need of progress &speed of distribution&minimising of hoarding also must be evaluated for objectivity.
This is the economical tool of America to influence and to enter in internal affair/politics of the country.They failed for weapons for India and now this is the alternative tool.In other words,we like to be slaves once again after Britishers.There are so many alternative ways to create employment and competion internally but who wants to think deeply.'Swavlumban'theory of Gandhiji holds good even today.
Look at the slow poisoning effect in China now.Who control their economy?
ECONOMICS is like water seeking its own level.Big fish swellow small ones and big countries suck small one to richer.
Western economic models were good in olden days and its utility is over now. There are ample proofs all around - Ireland, Greece, Spain, Italy and so on. India needs new economic principles and models to get out of the rot.Those who have stopped following the preachings of West have done much much better.FDI is not a solution. It is like assisting East India Company of British - and loose sovereignity. If somebody has to get to new economics and relevant social policies, reference is made to book " 5 Years Guarantee : How to make India richer "."For growth FDI is necessary" is erroneous concept ; similarly export is good for quick prosperity is also an erroneous concept.The book explains how and also gives different methodology for fast growth.Indian economists either understand and ignore for the benefit of their political masters or they have been trained in thinking of Western countries.We should not assist East India Company and the queen in national interest.
Thanks for the insight! But this knowledge is already in public
domain. Its also evident that the govt is working against the will of
the majority of the citizen. Of the 52 crore spent by Wallmart, would
have been distribute among the national and regional parties(both in
NDA and UPA). I'm not sure if this is the amount that's going to make
UPA take such a decision. The party funds(both NDA and UPA) needs a
public inquiry to check whether Mauritius or some other Island based
Benami company(who also has direct or indirect link with Wallmart)
has paid money to party fund. As Subraminiam Swamy in an application
to PM Manmohan Singh and Yevgenia Albats in her book has written how
Sonia Gandhi has taken money from KGP(which amount to treason). FDI in
retail may well be the case. I demand the rollback of FDI in retail.
FDI is the only way India can grow ,its protective policies are one sides.The same middle class which cries foul today will stand in que in these shops .If no further reforms India may go back to 90s .
India is not Mexico ! We have too many "natural entrepreneurs" of all
sorts and sizes than anywhere else. These will soon only learn more
Walmart "tricks" to add to their own bags of benefits. We may not drive
away the giant retailers someday, but we won't need to fear them.
Yes, we can. There are people who always oppose for the opposition sake. When Britishers left, they are worried that they are going to give ruling power to the illiterate brutes. Their worry was proved to be correct. Let us welcome FDI in Retail. There should be a clause if this becomes danger we shall terminate the offer. There are is always way to correct things.
Please think outside the box.Look around and see what has happened to most third world countries that has opened their market to free world trade.Wall mart can supply cheap goods -YES,all made/manufactured in china(very very cheap).All your money goes to china-they have trillions of $ now.They can buy your corrupt politicions with it to get exclusive rights within India.What can the Indians sell to china???Wall marts budget is bigger than the budget of many third world countries.Please stop this for the sake of the 600 million poor of india.Track this down to basics(and with a little bit of GREY matter)and you would see how damaging it would be to the local Economy.The poor beggers(farmers) won't be able to make a living-But yes things at WALL-MART will be cheaper-but where will the poor(unemployed farmer)GET the money to buy it??Please think .A few boys in Delhi are suffering from a SUPPER POWER complex.They are living in a crown cocoker land and will SELL
This is a very misleading article, based on convoluted prejudice and ignorance. Salami slicing for convenience with little regard to reality and growth.I could put a counter argument if this media would allow, as I have many years of professional experience working for a major Suoermarket Group. Indians should avoid getting too carried away from this delusional article and paranoia based on fear. Don't throw the baby out of the water, wait and see how the country develops, becomes competitive, innovative and benefit the consumers.FDI is the only way to bring about growth, generate jobs for millions, wealth creation and in the process alleviate poverty,illiteracy and unequal society. It gives hope to the impoverished and to the grindingly poor farmers.
Very good arguments! Only purblind and those who are captivated by the success and might of USA and those who are bound to it by affinity or circumstances of education and livelihood can find fault with such wonderfully written article. With facts and figures and logically constructed to show why India would not benefit from FDI. Basically trade is parasitic. Trade cannot create wealth. They only corner it. By allowing FDI, we are only increasing the wealth drain from this impoverished country. And as the supporter of FDI himself admitted, Trade is not rocket science! If the Government wills it, there no reason why we cannot bring all the advantages that FDI is retail are supposed to bring in. Thank you, Devinder Sharma! May your breed there be many!
Please come to the small towns in Southern States where I have lived
and worked for several decades. The kirana shops sell quality products
but the prices quoted are on the high side for its quality. The
vegetables which are brought to the market are fresh but the price the
farmers get from the politically affiliated middlemen is so less that
the farmers are in perpetual debt. In Tamilnadu the govt is giving
rice at cheaper prices at Civil Dept ration shops but we have to pay
very high rates to the quality rice which is required by middle class
families like us . I have a feeling someone is giving us a short
shrift.
Opening to FDI is a good move...whatever sceptics might say ! This is
the way forward; some would suffer but ultimately the whole benefits,
and this is how it should be.
Local retail stores dont provide good salary,no gratuity,no medical
insurance,no epf to employees.Many retail owners are crorepathis in
INdia.How?Because they control trade, politics and hurt farmers and the
consumers.Bringing in competition is good.
Mr. Sharma mentioned the truth .I hope it could help to open the eyes of your blind govenment.All these big multinational retail company always distroying the local business.More and more people will be out of jobs.they will flood with all kind of cheap stuff .
I don't think it's a good decision taken by the govt. it will show it's limitation after a short period (10-13years). govt. have to think about all the people who are related to retail sector. I totally agree that it give a rise to our economy. but after a period we all see it's drawback. it will provide employment to limited people for a limited period. and the people who are not educated can't do job. because it provide employment to only educated people. It seems to like that we are all become unemployed after a particular period. In India, many people are employed in retail sector. what happen with them and their family. they are not in condition to do job. i'm not totally criticising the fdi in retail, but it has it's limit. so think about the decision... upa govt
We are all talking in the air here. Our country is unique and to that extent no comparison whether with America or Bolivia or anywhere else is relevant. The good thing about the FDI move is that it has not been taken in a hurry. It has been debated and examined for ages and after taking all matters into consideration, the government has decided to implement. That is the Indian way - discuss and deliberate in a democratic manner and finally take the action. Actually no one really knows how this will pan out, but I dare say the process has been quintessentially Indian, and to that extent at least, one is satisfied. No one actually knows what the right way is, but given the process, chances are we are taking the right step.
Hence let us all just shut up and see how this pans out. The dice has been cast, and as citizens we need now to move forward and make it benefit us as a nation.
very nice information you give by this article . but in my opinion if government not do this type of steps we can't achieve our growth we should know that this is time for globalization and we can't back for reform but this step of government is not good for India govt should provide better improvement of current infrastructural . this is my opinion and point of view thanks.
I completely disagree with the logic given by the writer in the Employment paragraph. Jobs are obviously going to be created and the amount of human resource in India suggests that India can be a much bigger economy than the US.
It is quite unfortunate that the government has buckled to outside pressure in allowing FDIC in multi brand retail. Where us the evidence that it is going to benefit indian farmers? By eliminating middlemen these retail stores are going to become the single biggest middlemen. Businesses operate for profit, the argument that somehow these stores will provide better price for farm produce is misplaced. It has got Indian petty buoegoise's propensity to embrace everything that is western. What benefit would it serve to be able to purchase under one roof? We buy more needless things after the Advent of supermarkets rather than buying what we need already. By assuming that benevolent corporations by virtue of superior business practices would somehow offer solutions to all the problems the government could not solve in all these years is farcical. A listless government has unleashed a monster masquerading as game changer on the country. It will eliminate more jobs that it creates.
Americans are very much coercive by nature. President Obama suggested Indian govt to allow foreign investment and at the same time he stopped outsourcing. And the irony is that Indian govt succumbed to the pressure that they were making through the credit rating agencies. So, the move comes from less for the benefit of Indians but more for the corroboration to the victory of the second time presidential election. So, we will have to admit that the Indian PM is quite caring to The President. Hail Mr PM for benefiting the President at the expense of chronic of your fellow Indians.
It's not FDI that we need to bring food prices down but a SPIRITUAL AWAKENING. Every religion teaches that it is life giving to give food to others, and to give life is to be like God. There is plenty of food in the markets and small stores in India, but it is unscrupulous traders who keep jacking the prices up so they live it up. The high prices in shops are set by the TRADER MAFIA which get together and decide ONE HIGH PRICE for every item so a few very rich people shopping at their stores can buy while the average bread earner just looks at the price and puts the item down. In small towns this is a very cruel practice as big cities the salaries are very high though the rents are high too. In small towns numbers don't exist and sadly the high income wage earner does not exist either. So the shop closes down. Bringing the prices down would help traders, as more people would shop at the store and the common man who can eat better can work more and shop more creating a positive cycle
The fear of the author is very much justified, but i want to answer some of his queries. 1.Agriculture : blindly saying that FDI in multi brand retail will not benefit the farmers is wrong. If their is healthy competition in market a farmer can definitely ask for better price for its products Employment: as per my understanding it will definitely create employment , but only skilled employment. As these big retail shops are known for their efficiency and effective working, so for running such big retail shops they definitely need professionals with knowledge of supply chain, brand marketing etc (MBA's will definitely support this move). Secondly saying that it will end the employment source for the middle man is not true as India is very big country with population of more than 120 crore , so every one has ample opportunity in this big market to survive. Also these retail shops would be limited to only the metros so the second tyre cities will not be any any cascading effect at all.
Let it also be known that even the 30-per-cent local sourcing clause for single-brand retail has already been challenged. I think this was done just to be on the safe side. I don't think in India we will see a lot of single-brand retailers coming from outside. Nowadays mostly we see multi brand retailers. All the retailer like Walmart or its like are multi-brand retailers. Also right now considering the economic slowdown we should first take steps that would increase investment in the country. if you will put a 70% local sourcing right now, nobody is going to come. 30 % is just to show the global giants that India is a good investment destination.Over the next few years you will see that with low production cost in India the single-brand retailers will set up base in India otherwise they won't survive the competition from their Indian counterparts itself because Indian companies will be able to sell their products at cheaper price and then also make more profit.
Very good article. A bit more in-depth research in terms of numbers would be good. It is really painful to see how we are always made to remain as slaves. During colonial rule, British took away our raw materials, imposed laws to stop manufacturing in-house and they manufactured goods and sold back to us. In the recent past it is India's brain power - US MNCs like GE, etc. are using our man power for paltry salaries for developing high end technical products and again selling back to us at hefty prices. In software we remain as backend clerks or do some developmental work and generate patents for MNCs.Now again same principle is being applied in retail market.
How long we allow ourselves to be exploited? Is this not the right time to think seriously to utilise our resources for development of our own country? Greg Chappel was right when he said we are happy to be lead but not to lead.
High time for policy makers to think with patriotism instead of buckling to outside pressure.
I really like the writer perspective but its comparing the consequences of retail in America and Europe to India,which can not justified at any level,it should rather compare it with any developing countries.And clauses of Fdi in India are not looked in detail,backend storage being one of the most important.
Y do Indians have the habit of finding fault in everything? I found your arguments quite biased and twisting the facts for supporting your claims.Quoting PM about FDI being a boon for agriculture means that there will be some advantages and pluspoints from FDI which are beneficial to agricultural sector. It doesnt mean that Indian agriculture sector will be wholly supported and sustained by FDI in retail. Likewise Indian retail market employing 40 million people and comparing that with Wal-Mart's 2.1mn- Does that mean that let all the 40mn Indians stay in an economically impoverished state and shouldnt get any financial benefits that the 1.2mn walmart employees enjoy? Wont that be nice if atleast a few can avail sustainable income and secure livelihood or is it tat the FDI if implemented should act as the panacea for all the ailments of Indian society?First & foremost there should be a change in the mindset of the so called intellectuals who criticize anything and everything blindly!!
Being a country that is the second largest producer of fruits and vegetables in the world, India is bound to equip itself and prevent the abnormal wastage of 35-40 percent of its produce due to lack of cold storage facilities, infrastructure and logistics support. It is a criminal loss that around 10 per cent of our staple produce is being wasted because of poor storage and warehouse facilities. Of course the FDI proposal that incorporates conditions to invest up to 50 per cent for the installation of cold storage facilities must give immense employment opportunities for marginalized communities in remote places where vegetable and fruits are cultivated. At the same time, is it not advisable to comprehend the reality that India is not like the neighboring Indonesia in S.E Asia or U.S.A or China? We are unique and have exclusive entity due to geographical and cultural reasons. Let me quote the words of Dalai Lama "Open your arms to change, but don't let go of your values".
I had personally witnessed the intensity of currency crisis in sub-urban Jakarta, the Capital city of Indonesia wherein house-wives assemble and block highways to sell off household things displayed in road sides for liquid cash for mitigating their mounting household expenses!
Yes, there are challenges to be mitigated but its not like it's not been done before. I live in Singapore where Carrefour has decided to quit Singapore, Malaysia, Thailand and Indonesia since it was unable to compete with local chains. In Germany Walmart met with a similar fate. You grossly underestimate the Indian chains and local mom n pop stores.
Modern retail only makes 5% of the entire retail in India. By 2025 it would make 25% - but by then retail pie is expected to grown 2 folds.
I am not for or against. But please stop misleading people and sounding like a mouth piece of some political parties.,
One major fall out of FDI in retail will be personalised service offered by our small retailers. Also retailers respect the cultural, ethnic sentiments of their customers and accordingly arrange their products in their stores, which will be totally absent in big retailers. In fact, the current operating big retails are already displaying total disregard in these aspects.
It is a fact that the opening up of retail will help the big brands to enter a very big market. With time we will also succumb to the pressure these giants will be putting. For them spending money to kill market is the tactics and soon in a decade we will become a dependent economy with the poor citizens grappling to meet their livelihood.
This needs to be opposed, not for the sake of opposing, but needs to be taken at a higher leve
Iam sure this decision will be later reviewed by the parties supporting it today as blunder of 2012.
As your cartoonist has depicted, this is the end of UPA-II. Supposing the Government falls on this issue, what does the Congress tell to the people? How will the Aam Aadmi perceive and remember the UPA-II? Scam and arrests of the Minister, soaring inflation will remain itched in the memory of the voters when will cast their votes in the polling booths. The issue is not whether FDI in retail is economically warranted, the issue is how it will affect UPA-II politically and will it survive? The timing is wrong and there is no Narsingh Rao or Pranab Mukerjee to take care of the political consensus.
American stability of economy is the low priced raw materials from Asian countries and the open markets which sell American products in higher price ! By allowing retail sale of multinational products in India Dr.Manmohan Singh has sacrificed Indian commons as well as the wholesalers and Indian retailers ! One place a cheating to balance the economy of America . We have more evidence that Indian Goverment helps endless to America by buying defense items in a highest price . Already America chewed $10 billion from defense of India . If we look in such a view we will understand for what reason they devalue Indian currency and opened market ! For America ?
A good analysis by Devinder Sharma. We cannot compare agricultural sector in U.S. with India. In U.S., agriculture accounts for 3 percent of labor where as in India it is 60 percent and most of them are in Below Poverty Line. Hence, even if we provide a small benefit to farmers it is a great advantage.
Most of the small retailers don't pay tax which is a huge drain to economy. As consumers, we want a high quality product at cheaper price but small retailers offer low quality product at higher price if there is no alternative. In that case is it necessary to consider their benefits and employment?
I have bought good quality fruits, provisions, dairy products from major supermarket chains while in Canada for five years. For the earning in dollars by a poor immigrant, the prices were quite cheaper. I have observed for nearly forty years how the poor Indian villagers are under the control of the commission agents and the local politicians. The vegetables are sold for distress price to them and I have to shell out three times more the price for vegetables in Indian metros. Mangoes rot in our backyards; the milk is diluted with water. We the consumers do not know the policies and the repercussions but we want the best quality products at competitive prices.
One fundamental premise we all forget is that nobody has ever been able to force consumer to buy anything. FDI in retail is only increasing choices for consumers. The more the players in the market, the greater is its efficiency.
Beautiful analysis. Only wish our economists in power had the same analytical skills. Hope Mamata Bannerji means what she says, and succeeds.
AWESOME analysis and a great article! Our leaders have sold us out. Please NO more Congress. No more western dis-educated PMs. No more! I will vote, support and lobby for which ever party's mandate it is to roll this back. Watch what happened in Bolivia carefully because India is walking down the exact same path that leads to a precipitous cliff.
f d i will never create job in 120 crore population rather it will take away in the name of monopoly,majority of retailer who earn middlemen profit has to struggle hard to compete with getting directing with farmer ,buying bulk supply,big corporate first control farmer,than after controling whole market they will squeese their profit,if some thing go against their system,they will buy politician,parties ,law ,paid news,majority of public will be put to hard work culture of paying rent,food bill,majority of public already finding hard to survive with families,majority of public has to start work,migrating from village to town to big cities,it will be good consumer for junk food with cheap lebel,majority of public will become middleclass,property will out of reach from majority of public,bank willbe most sought after help in term of credit card,creating more sinister buble of credit creation ,whole west economies are already suffering and dictating whole other economy to suffer same fate
Made in USA? I would read that as 'Sold in USA'. Walmart, Tesco sell goods mostly produced in China & ASEAN. Also, the author seems to be willfully unaware of the clause that says a part (almost half) of the FDI should be invested in the back-end infrastructure.
A very good article which has laid out all the facts. Its crystal clear that large retailers will crush the small shops all over the country. The Manmohan Singh Government is selling India at bargain basement prices to foreign interests. If the people remain passive then they deserve this.
Is anybody in the Government of India listening?? or they have all sold their souls and any love for their country, if they had only, and are hell bent to favor the multinationals on expense of millions of poor Indians. How can they sleep at night by destroying the very country that they claim to represent!!
May God bless them right thinking and they open their eyes to reality.
Jai Hind.
FDI in retail, as far as agriculture is concerned it is supposed to bring numerous advatages. FDI can possibly make our unorganised agriculture into an organised one. Our agriculture is starving of investment and lack of long term strategy. It can make farming remunerative and bring a sense of pride in farmer, who is ready to jump into any lucrative livelihood other than farming. With proper constraints in place FDI can make the goal of 'Farm to Fork' a reality. Indian trading community is resilient enough to have its own share even with big players in place. On the positive front it enables competetive pricing.
Opening of retail sector and airline sector and other more sectors will benefit the common man and consumer because now, he will get goods and services which could be low priced and also professionalism and better service. Also, currently there are lot of so called 'middlemen' who have entered the field in last 10-15 years with lot of cash and are playing games in the market to make fast bucks by stocking up essential commodities and driving artifical scarcity and artificially inflating the prices. This Mafia will now end, because the Multinational companies will kill these crooked players, but sad part is that, this will slowly and surely, also signal the end of small grocery, cloth shops, shoe shops, toy and cosmetic shops , vegetable and oil merchants as a single Walmart or Carefour store in a prime area of the city will have all products under one roof. The small retail merchants should now - either become employees in such Super Marts or move their shops to smaller towns.
It is same rotten argument we made when computers came to india..Path forward is embrace the new and modern technology and business model as per the country needs.
Out of 12 million jobs provided by retail sector, how many employees are getting decent wages with PF? How may mom and pop shops paying sales tax and income tax? How are consumers are validing the worth of their product?
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