Indian Retail sector vs FDI

The Indian Retail sector has witnessed a gradual albeit steady metamorphosis over the last decade alone. Despite the myriad advances over the years, the sector continues to remain highly fragmented; still primarily dominated by the unorganized segment – the quintessential traditional family run stores.

Foreign Direct Investment (FDI) in the retail sector has always been a contentious issue per se, courtesy the well documented proclivity of our policy makers to dither and delay decision making on key aspects stemming from political risks at large.The retail FDI policy has been burning smoke every now and then with the hungry government trying hard to buy it off the shelves before it expires. What are the various issues curbing it?

When asked this to Amitians, I got a lot of reasons for the same. Eklavya , pursuing MBA in Marketing says ,"Firstly, Political Consideration is a real set back.These regional satraps in the name of protecting the interests of poor, oppose liberalisations of policies which might lead to increase in foreign investment. Government which is dependent on support of these outfits is hence forced to slow down liberalisation of FDI policies. Secondly, despite the importance being accorded to infrastructure by the government it continues to be a reason to not invest in India. India's roads still continue to be one of the worst in the world. The power cuts remain a way of life. Existing infrastructure projects often do not get adequate government support leading to withdrawal of foreign investment. Enron faced such situation when it pulled out of the Dabhol power project which had an FDI of $2.9 billion citing government opposition to the project.

Thirdly,India needs to upgrade its labour laws to attract foreign investors which in the long run will prove beneficial to labours also.The inflexible nature of labour laws often makes investors shy away from India. Lastly,in India corruption is the norm, not an exception. International reports on transparency rank India as one of the most corrupt country every year. A combination of legal hurdles, lack of institutional reforms, bureaucratic decision-making and the allegations of corruption at the top have turned foreign investors away from India."

The way India is expanding and impacting the world after liberalization, we need to improve our lifestyles as compared to other countries. We need to improve infrastructure and many more things.

Now the Committee of Secretaries, CoS, had given their nod to 51% FDI in multi-brand retail. It means Rs. 450 crores in multi-brand retail, but with stringent conditions like mandatory investment of at least 50% in the back-end infrastructure, minimum sales of 30% to come from small traders, and 30% mandatory sourcing from small and medium enterprises.

Therefore Firstly,with 50% investment in back-end infrastructure, it will not improve our country's infrastructure but also generate the employment to the country. So, it is a valid point.

Second, minimum sales of 30% to come from small traders, it will create a very good opportunity for small traders and they will competitive enough.To this Anahit, an aspiring enterprenuer has to say,"The 30% sales for the small traders is good because it is going to create a great impact on the market.It will provide an incentive for better performance to maintain the position."

Third, 30% mandatory sourcing from small and medium enterprises will give an opportunity to small and medium enterprises to be competitive and improve their quality because whoever will come in India they will be very quality conscious.

The question here arises of how do the domestic players react to it?The answer to this is FDI in Retail Sector is a very good sign for consumers because they will get lots of varieties in a reasonable price, employment generation for 2nd largest populated country, and competition increase.

Aarav , a student has to say ,"With companies like Wal-Mart or Tesco, the largest private employers of the world at our doorsteps, there is more chance of employment rather than job losses. According to stats, at least 10 million jobs will be created in the next three years in the retail sector." Thus, being a student ,there seems to be a bright scope of advancement in terms of modernisation and globlisation as there would be handful of foreign investments in various parts of market.

Alpika further adds,"Foreign retail majors will ensure supply chain efficiencies, as they will include cold chains, refrigeration, transportation, packing, sorting and processing. This will lead to lower prices of products, benefiting consumers at large, minimum wastage of food resources due to present poor infrastructure, lesser inflation rate due to the efficiency in the supply chain and hence a step towards the speedy growth of the country."

With 50% of the Indian workforce reaping profits and the common man dodging the weight of inflation, the policy promises a sound future and better living for people.