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FDI in Multi Brand Retail - (Feature)
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Dhiraj Singh | 05 Dec, 2011
The Government has decided to allow Foreign Direct Investment (FDI) upto 51% in multi brand retail. This means that global retailers can come to India with a local partner and set up stores in the country. Till now FDI was not allowed in multi brand retail. However, there were big multi brand retail outlets owned by Indian entities.
This decision is an enabling policy that will open up new windows of opportunity to modernize the retail sector particularly for agricultural products and the small-scale sector.
The benefits would be for all:
The farmer will get a better price for their produce as middlemen will be removed and retailers will buy directly from farmers. Farmersâ losses from wastages specially in vegetables and fruits will come down.
The small scale sector will find new buyers and cheap and better quality source for their products.
Consumers will get better prices and greater variety from these stores. The entry of global players will encourage existing traders and retail outlets to upgrade and become more efficient, thereby providing better services to the consumers as also better remuneration to the producers from whom they source their products.
This is also one of the most effective ways to tackle rise in food prices and inflation due to availability of food items on lower prices.
Today India is one of the largest producers of fruits and vegetables in the world. However 30-40% of food and vegetable products go waste due to lack of storage and cold chain facilities. This decision will bring in funds for investment to improve supply chain infrastructure such as cold storage, transportation and procurement along with bringing in investment for growth of the economy.
This will bring huge employment opportunities in agro-processing, sorting, marketing and the frontend retail business. As per some estimates upto 10 million jobs will be created in coming years.
Government has provided safeguards to protect national interest such as:
· Minimum investment by the global retailer will be $ 100 million and 50% of which will be in backend infrastructure that will control wastage and help local farmers. Backend infrastructure will be in or near villages and will be of immense value for rural economy.
· It has been made mandatory that 30% sourcing will be done from Indian small industry. This will promote local manufacturing, as Indian small industries will feel encouraged to expand capacities in manufacturing thereby creating more employment and also strengthening the manufacturing base of the country.
·These stores can be set up only in cities with the population of more than 10 lakh. This provision along with the requirement of master/zonal plans will make sure that small retailers are not affected. Moreover small retailers can benefit from sourcing their products from deep discount wholesale cash-and-carry big retailers. This will improve quality of their product and reduce their cost.
· In order to ensure supply to ration shops (PDS) government will have the first right to the procurement of agricultural products. This is important from food security point of view also.
Some people fear that big retailers will destroy small traders by keeping low prices initially (predatory pricing). However, Competition Commission of India will not allow this to happen. As the policy will be implemented in only 53 cities (with population over 10 lakh) which will make it difficult for big retailers to crush competition. In many developing countries like China, Thailand, Indonesia, Brazil, Argentina, and Singapore, where 100% FDI is allowed, small retailers are successfully co-existing with big retailers.
Indian labour will continue to be protected by Indian labour law. It is an enabling policy framework. States are free to adopt it or leave it. Those states that do not want to have FDI in retail are free not to allow them. This is done to maintain the freedom of states in federal structure. FDI policy does not override the existing laws governing, trade and commerce in the country. The State Government laws and regulations in this regard would apply as much to the foreign players as to the establishment of any domestic businesses in the retail sector. (Source PIB)
* The author is Director (M&C), PIB.
* The views expressed by the author in this feature are entirely his/her own and do not necessarily reflect the views of SME Times.
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FDI a decision of making fool.
Subhash Sharma | Wed Dec 7 04:53:33 2011
The government had shown luring effect of FDI but verse effect they are ignoring because of there own self. once FDI entered no doubt farmers and customer be benefited but more beneficiary are FDI dealer and INR will go to foreign counterpart they will use this money against India and its people. After some time there is a monopoly of all FDI agents and neither farmer nor customer will be benefited. There are large number of Indian company who started their business as a direct marketing to fool the innocent people and lastly they are selling there own cheapest brand more or less equal to highly qualitative brand who benefited they themselves but no care after all they are not using that money against the sovereignty of country and its people. But FDI dealers can not be Indian patriotic they are simply coming to earn business and not to benefit any body they have there own patriotic feeling to strengthen there country and countrymen not us so it is a worse idea to allow any body in retail sector. India's future is secure in Indian only not any body else. This is a great failure of Congress Govt. they are playing with the sentiment of innocent people to benefited themselves.
Thanks
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