FDI in Multi-Brand retail in India: much in news
Recently, there has been a lot of debate and protests around the Indian Government's plans of bringing in Multi-Brand Retail in FDI. While, single brand retail FDI has already been passed, that has not been much of an issue, because probably there are not many such companies. Companies like Marks and Spencer and Sweden's IKEA have plans in this domain.
However, Multi-Nationals like Tesco, Walmart etc are very keen on a big market like India. It is difficult to say whether all the protests are politically motivated, or not. Yet this is for sure that Retail FDI is not the devil it is made out of. Nor, would it be a magic wand to solve all Indian Economic problems. Let us look at what are the Pros and Cons of FDI in Multi-Brand retail in India:
However, Multi-Nationals like Tesco, Walmart etc are very keen on a big market like India. It is difficult to say whether all the protests are politically motivated, or not. Yet this is for sure that Retail FDI is not the devil it is made out of. Nor, would it be a magic wand to solve all Indian Economic problems. Let us look at what are the Pros and Cons of FDI in Multi-Brand retail in India:
Pros of Multi-Brand retail FDI in India
1)Increased competition would lead to better quality goods and better price bargain for the consumers and would probably help increase household savings, which are under severe pressure because of increasing food grain, milk, vegetables, fruits and Petroleum prices.
2)Many local or Kirana shop owners are already buying in bulk from cash-and-carry stores like Carrefour and even have tie-ups with Big Bazaar, Spencer's etc. With more international brands, they might get better prices for many products. Contrary to the fears that many of Kirana stores will be wiped out, they may in fact be better off.
3)Since government has mandated a good percentage of products to be sourced from Small and Medium enterprises, this sector in India would be benefited. However, how much would remain to be seen.
4)Enhanced cold storage facilities would reduce wastage of fruits and vegetables. This would bring in drop in their prices and would also improve farm efficiencies.
5)Farmers would get better remuneration for their products, as they might be able to circumvent the middlemen route and directly engage with the retailers.
6)Increased jobs in retail sector and more jobs in supporting jobs. Skill level of the retail sector employees could also improve.
2)Many local or Kirana shop owners are already buying in bulk from cash-and-carry stores like Carrefour and even have tie-ups with Big Bazaar, Spencer's etc. With more international brands, they might get better prices for many products. Contrary to the fears that many of Kirana stores will be wiped out, they may in fact be better off.
3)Since government has mandated a good percentage of products to be sourced from Small and Medium enterprises, this sector in India would be benefited. However, how much would remain to be seen.
4)Enhanced cold storage facilities would reduce wastage of fruits and vegetables. This would bring in drop in their prices and would also improve farm efficiencies.
5)Farmers would get better remuneration for their products, as they might be able to circumvent the middlemen route and directly engage with the retailers.
6)Increased jobs in retail sector and more jobs in supporting jobs. Skill level of the retail sector employees could also improve.
Cons of Multi-Brand retail FDI in India
1)Some of these MNCs in retail like Walmart might use their deep pockets and political connections (yes, highly likely!) to gain monopoly in many goods and products that they provide. Also, they may offer very big discounts to the customers. This would not only hit local small scale Kirana shop(Mom and Pop stores as they are called in US), but also big Retailers like Big bazaar, Spencer's, Aditya Birla Group's More etc.
2)Local stores sales could be affected, may be not for all the goods, but for some of the product lines.
3)The Foreign retailers might use more of automation, and might not create as many jobs as is expected.
2)Local stores sales could be affected, may be not for all the goods, but for some of the product lines.
3)The Foreign retailers might use more of automation, and might not create as many jobs as is expected.
A personal opinion:
All in all, from whatever articles- be in newspapers, or on Internet, that I have read, I can make out that overall FDI in Retail would be beneficial for India. Regarding statements that many local shopkeepers would be forced to shut their stores, I can say that if big stores like Big Bazaar, Spencer's , EasyDay, More etc could not shut them, Walmart, Tesco etc also won't. Moreover, we have the regulatory body Competition Council of India(CCI), and Monopolistic and Restrictive Trade Practices Act(MRTP) to keep these retailers in check.
A few more points:
=>Many people in bigger cities and metros are already buying from big stores. Yet, they still go to Kirana stores since they cannot make a trip each time to big stores for all their needs.
=>In smaller cities and towns, many people buy goods on credit(not credit card!), and pay after they get the money with them. I do not think that stores like Big Bazaar etc have any such practice? So, these people are highly unlikely to think about Walmart, or other new comers to India.
=>Many small scale traders have formed big unions and try to control prices and supply of goods. They influence and fund political parties and oppose the entry of more big retailers. Themselves, they never give bills, and even opposed a move by Delhi government a few years of ago of mandating giving bills to the consumers. So, do they have the moral right of misinforming public about the entry of the bigger retail stores. Why not reform their own practices?
=>The government and the regulatory agencies will have to be careful that the big players like Walmart do not use their power and reach to exploit the Indian market. This is easier said than done. Yet, this might be required if they do start such acts.
A few more points:
=>Many people in bigger cities and metros are already buying from big stores. Yet, they still go to Kirana stores since they cannot make a trip each time to big stores for all their needs.
=>In smaller cities and towns, many people buy goods on credit(not credit card!), and pay after they get the money with them. I do not think that stores like Big Bazaar etc have any such practice? So, these people are highly unlikely to think about Walmart, or other new comers to India.
=>Many small scale traders have formed big unions and try to control prices and supply of goods. They influence and fund political parties and oppose the entry of more big retailers. Themselves, they never give bills, and even opposed a move by Delhi government a few years of ago of mandating giving bills to the consumers. So, do they have the moral right of misinforming public about the entry of the bigger retail stores. Why not reform their own practices?
=>The government and the regulatory agencies will have to be careful that the big players like Walmart do not use their power and reach to exploit the Indian market. This is easier said than done. Yet, this might be required if they do start such acts.
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