FDI in Retail

Well, the hell has broken loose.

 This seems to be a subject where everyone is claiming expertise and every tom, dick & harry is quoting numbers from obscure sources to justify their side of the story. And then there are the experts and the think tanks who are writing lengthy articles to support their cause.

Well, to start with, a lot of these experts are nothing more than paid spokespersons, who have received their share of lucre to mouth the words given out to them.

To look at dispassionately at this issue at large – Who are the people who will be adversely impacted ?

1) The Indian chain retailers

2) The middlemen in the mandis

3) The neighbourhood Kirana shops

Who will Benefit ?

1) The MNC retailers

2) The Indian Farmers

3) The Consumers

4) The Employees

If we were to look at the first set, ie, the adversely impacted : The Kirana Shops and the middlemen in the Mandis are known to hoard, profiteer, evade sales Tax, Octroi, Income Tax, employ child labour, rarely pay minimum wages or follow labour laws. They are also known to sell spurious/inferior products to consumers. The major Indian retailers have already entered the market with their large format stores. They are present in every city worth naming and have already impacted the local Kirana stores. And the local Kirana stores have improved their service levels to stay afloat ( or perish in some cases). So, when an MNC retailer will enter the market, the most impacted will be the Indigenous Large/medium Format retailer, than the Kirana shop. So, to summarise, the key affected parties will be the middlemen and the Indigenous Large/medium format retailer.

The Beneficiaries are : The MNC retailer who brings in investments into the front and backend (and hopes to make profit) The Indian farmers, will, hopefully, no longer be fleeced by middlemen, as is the case today. The biggest share of the value created in Indian Agro Sector goes to the middlemen. This would, hopefully, change. If our experience in contract farming is anything to go by, it will be a change for the better. The Indian Consumer, will get better prices, more choices and better shopping environment, if he so chooses. The employees will also be benefitted from better wages, better working condition, investment in training and more employment options

When I see people representing vested interests obstruct FDI in retail in the name of the farmer and the retailer, they often represent the interest of the middlemen and the Indigenous Large/medium Format retailer.

Organised chain retail has arrived in India. FDI or no FDI. The local Kirana stores will be under pressure to improve/innovate or perish. That is the way life is.

Remember Typewriters ?

Lastly, inspite of a plethora of data being thrown around by both the sides, the fact remains that the impact of FDI in Retail will be felt mostly in bigger towns and high population clusters having higher disposable income. It will not have much impact on the “Bottom Of the Pyramid” retails, who have a different business model and the Modern Retailer will find it difficult to compete with.

So let saner voices prevail.

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3 thoughts on “FDI in Retail

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