FDI: The pursuit for an answer is still on

Both organised and traditional retail have co-existed and worked so far in India. Will the entry of foreign players (if allowed in multi-brand retail) disturb the equation? Let's find out from the biggies

Though a lot has been said and written about FDI in multi-brand retail. However, considering the raging food inflation and the amount of wastage of farm produce that the country has witnessed of late, it makes sense to bring up the issue once again. Moreover, the government is also actively doing the research and analysis regarding its benefits. It is learnt that the reports of the research conducted by the government on this whole issue reveals that opening up of FDI in multi brand retail would not only help the farmers but would also keep the price line in check. Let’s explore how?


The concern


The subject has caught everyone’s attention in the retail industry because there are certain sets of issues among the small and medium segment retailers in the country. Unemployment is already a problem and with global giants like Wal-Mart, Tesco, Carrefour all lined to make their entry, there is a notion in people’s mind that the problem will become even bigger. Small retailers and the self employed people who run these popular mom & pop stores are the largest source of employment in rural, semi rural and urban areas. They feel that the big retailers would consume their pie leaving them with nothing. And political biggies like BJP have stated that around 10 crore small and medium enterprise will have to bear the brunt if government opens up the FDI in multi brand retail.


Cap or no cap?


The government has been acting cautiously on the whole issue and has been looking to put some caps on FDI along with other regulations that would support the small and medium manufacturers. Retail giants like Rajan Mittal, Vice Chairman and MD of Bharti Enterprises, do not want any kind of cap in multi brand retailing. They feel that the competition is very healthy. By putting caps and laying all kinds of conditions on employment, etc, government curbs the freedom of the entire industry.


However, Raj Jain, MD and CEO, Bharti Walmart avers that although they do not want any cap, they understand that the government has other compulsions and hence requires taking a calibrated approach and they fully support it. He further adds, “Whatever the government wants, we are fine with it because we are here for a long term.  We want to work with the government in this area and want to demonstrate the benefits of the FDI in multi-brand retailing to the government, and to the consumer as a whole. 


There have been reports that the government wants a mandatory amount to be invested in the backend. Jain feels, “Nobody can do their business in retail, without investing in the backend. So if the government is keeping some rules and regulations on this, it’s good and we all support this. Any serious retailer will never hesitate in investing on the backend.”


News has also been doing the rounds that the government wants a reservation of 50 per cent for the rural youth in the cash and carry business on which Mittal says, “As long as the unemployed and underpreviliged youth including the rural is concerned, it is fine with us, and is happening from our side.”


He refers to the students at the Bharti Walmart training centre which the company has opened by entering into a public-private partnership with the Delhi government and adds, “They are all underpreviliged youth, who never got an opportunity to go to college or to go in for higher education. And if we see, the business of organised retail is the only place, where for the first time these youths get employment opportunity and not only that, they have been given the  development training throughout their career. Training and development of the youth are the integral part of the retail and we are proud of understanding it and implementing the same.”


Threat to traditional retailers?


Organised retailing is already present in India. Any individual or any company can do it and many people are doing it. The issue here should not be what will be the effect of FDI, the issue here should be, whether or not the organised retailing is good for our country. Jain and Mittal believe that there is no threat to small retailers. Ultimately, a local pushcart vendor will be housewives’ first choice when it comes to buying vegetables and fruits everyday. No modern retail would provide services at the doorstep. Modern trade is good for shopping on a weekly basis and to fill up the stock but at the end of the day one will go to a kirana store for one’s small and daily requirements.


“If we look at China, where FDI was permitted in organised retailing some 20 years back, still 80 per cent of the small retailers are present in the country. Since people have no idea of this kind of concept here, I can understand their fear, but at the same time they are unnecessary,” says Jain.


Bharti Walmart which is present in Punjab maintains that they have been going directly to the farming community there and there is empirical evidence that shows that whenever they have been to farmers directly or even the small manufacturers, the farmers and manufacturers have benefited and so have the consumers.


Talking from consumers’ viewpoint, getting global players in the country will bring in the competition because of which, the prices will go down and will help control the inflation rate!



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