Retail being a huge sector has been shedding its old unorganised image only to be replaced with glitzy organised stores, sprawling malls, and capital inflow from corporate houses. But, this massive transformation requires more money and India as a leading developing country cannot lag behind the international trends. It's the time's demand that these changes have to be very fast to realise long term benefits.
If we see other developing countries, which include Brazil, Russia and China too, FDI has actually initiated competition diffusing an ethics for better productivity in every layer. FDI has facilitated developing countries to integrate into global economy. This, in turn, has created new markets, improved the purchasing power and standards of living of the consumers.
Where does the opportunity lie?
The farming sector will definitely benefit from regulated policies and legislation as the role played by intermediaries will be eliminated ensuring better profit margin for the farmers. With increased demand of stock, small sectors of food processing units will benefit. Augmented capital inflow will facilitate betterment of infrastructure including well planned back-end operations and logistics. The real estate will see rising demand for world class spaces and flourishing of malls. Mergers & acquisition will see a rise in numbers compared to the last couple of years with foreign companies feeling secure for business-friendly environment. The business deals will open the door for job seekers in retail and ancillary sectors. With more brands available in the market the choices will be more, which will also lead to a highly competitive market and lower price points for merchandise. This will also bring down inflation.
Challenges
Jim O'Neill, the economist at Goldman Sachs, has famously commented that India is the biggest "disappointment" amongst BRIC nations in terms of FDI, productivity and reforms. The person coined the term "BRIC" for big fours, Brazil, Russia, India and China. According to Krishan Malhotra, Partner, KPMG the challenges can come from the regulatory authorities, also APMC (Agricultural Produce Market Committee) Act can pose threat to any such development. On other hand, India has been eagerly awaiting Goods & Service Tax for uniform tax regulations. So, with the implementation of raised level of FDI, India requires to work out on these areas. In regard to APMC Act, we can say that FDI can actually bring in improvement in the act. In the wake of FDI in multi brand retail, it was reported that farmers in Punjab sought reformation in APMC Act by the state government for better quality produce and high returns.
FDI effect in other countries
China Scenario
Allowed 100% FDI in Retail way back in 1992
Growth of hypermarkets (1996-2001): 600
Growth of small retail outlets (1996 - 2001): from 1.9 t0 2.5million
Increased employment (1992-2001) 28 t0 54million
Indonesia Scenario
Allowed FDI in retail in 1990s and the current FDI limit is 100%
traditional retailers controlled 70% of all food retail
traditional retailers owned 90% of fresh food retail
Japan Scenario
The big retailers support small retailers with capital infusion, design, innovation and operate them as franchises.
Copyright © 2009 - 2024 Franchise India Holdings Ltd