What happened:
Government has decided to allow 51% FDI in Multi-brand retails.
What are the pre-conditions:
- Minimum investment of $100 million.
- 50% of the investment is to be in backend infrastructure development.
- 30% of all raw material has be procured from India’s small and medium industries.
- Permission to set up malls only in cities with a minimum population of 10 lakh.
- Government has the first right to procure material from the farmers.
- Products should be sold under the same brand internationally.
- Foreign investor should be the owner of the brand.
Present Condition:
- Farmers get only 10 to 15% of the price we pay.
- 3-4 middlemen in between farmers and customers.
- Huge post produce losses for farmers due to inadequate facilities.
- A poorly managed food supply infrastructure.
Why do we need it:
- We are the second highest producer of fruits and vegetables in the world but still we are not able to utilise is properly because of inadequate infrastructure facilities.
- It will reduce pre-harvest wastage/losses and thus help control food inflation.
- It will create 1.5 million more jobs in 5 years. Apart from the huge number of indirect employment.
- It will increase competition which is always beneficial for the customer.
- It will remove the middleman from the equation. It will reduce costs which in turn will reduce prices.
What about the problems:
There will be no problems.
We already have local players like Reliance Fresh and Big Bazaar. They have done wonderfully well. Local traders are still trading as they were. Why not allow foreign players? They will bring with them human/monetary/knowledge capital which are very important for a developing country like India. Just bringing proper storage places will go a long way in solving the wastage problem.
China, Brazil, Argentina, Singapore, Chile, Thailand, Russia and Indonesia all allow 100% and their economies have benefited from this move. India is only allowing 51% and that too with a lot of checks.
We don’t have to worry about monopoly because the Competition Commission of India can handle all anti competitive practices including predatory pricing.
In India, cities with population of more than 10 lakh are just 53 in number. This means that any negative impact will not have huge repercussions. Kirana store walas in majority of other cities cities will be totally unaffected. It’s a small but steady step on the path of liberalization.
It will decrease unorganized labour sector and bring them all under organised labour. This will it will be easier to enforce labour laws and also check its implementation. A lot of jobs will be created. Ofcourse a few will be lost as well but that number will not be very high. There will be a reorganization of the job structure rather than a reduction.
It is true that the government can also provide all the infrastructure facilities that the companies will provide but true governance means less government role and more freedom to the society. Why should it be a problem if companies improve infrastructure facilities in return of a gain?
Thus we can see that the FDI rule is for the greater good of the society. Oppose it at your own risk.
Thanks
Napster
This post first appeared here on my personal blog.
Comments
I have a study of 10 years in RETAIL.
I request author to just search in google regarding Wal mart effect in Retail sector in all world economy. U will find result why Majority Parlament members oppose FDI in retail
In Indian economy, retailer is second largest after farmers, "This is not TRY & if fail than we will change policy" Once FDI in retail sector come than only result will be there and no dobut it will be negative result in INDIAN ECONOMY
Read Barack Obama Twitter account. he twitted before few days. "Please purchase product from local dealer or from street dealer"
Getwell soon
I agree that there are a lot of middlemen. Some of them will be affected. The income they used to get by exploiting the farmers will not longer be there. Walmart will build malls and storage spaces. They will employ a LOT of people. Honest work. Barack Obama can say whatever he wants to. All countries are different. Policies have different effects on their economy. I have also mentioned in the post that most countries allow 100% but we are allowing only 51% and that too with checks. So we are not opening ourselves completely. It is a measured and well thought out step.
You did not even take the pain of reading up on the exact policy that the government has implemented. I can understand. Studying retail for 10 years can do such things to people. :P
Don't you think China and other 1st world countries will dump their goods in India ?
Our PM is saying that it will bring new technology to our country, don't you think Indians are capable for that? In 1980s, Mr.Sam Pitroda and his colleagues brought Telecommunication Revolution, Mr.Kurien also, brought White revolution, without any support of Foreign companies. Don't you think, we can bring some changes in Refrigeration and food security sectors? Why we should open this field to Foreign bulls?
If government can't provide refrigeration facility then we can open this field to Indian entrepreneurs.
{ Fact about Walmart :- Walmart is one of the biggest importer from China. If you separate Walmart as a Country it becomes one of the top 10 largest importer country from China in the world.}
2) What about Our Nation Father - "Gandhiji" who advice to use "Swadeshi Goods" ? Have u any idea why he suggests so ? It generate self employment. Here we are going to eliminate all employment & After new Big Company come & he will give us a job !! Good Thinking of Indian Govt and some of their supporters
3) Whatever Barack Obama saying is of course for his nation, but a good example for us. After two decade experience, facing trouble of unemployment & want to come out from this trouble.
4) Storage: Where is 24 hours electricity supply in INDIA ?? Wal mart will bring ELECTRICITY FROM China !!
5) Farmer : 96 % farmers having land less than 2 acre in India. Now, Foreign Retailer Company come to India and Contract with this farmers having less than 2 acre land and Purchase "A" "B", "C" & "D" grade Goods from this farmers. Contract with small farmers not possible at all. Wal Mart is going to purchase only "A" Grade goods. Can any one explain that why this company come to INDIA ? For profit or For Loss ? Contract purchasing, Farmers benefit a another joke.
6) Consumer: If competition than consumer got benefit but a retailer having investment of 2 - 3 lacs can compete with this company ? In Indian Retail Market, already competition there. If more competition
than Result will be "SHUTTER" down.
7) Govt has already taken decision & if they not roll back than Wal mart not require 10 year to collapse retailer.
After couple of years, Indian Prime minister will also use twitter & say whatever he want to say to our Indian Citizen. Let hope he will not say whatever Barack Obama said in america after two decade of this policy.
Govt. taken a decision, they will follow, I have no problem. You favor govt policy, I have no problem as I am not a "RETAIL" trader or Middle man who is going to effect or having business loss in future.
Whatever I have said is my practical study of Retail Sector.
If anyone doesn't agree with me than I don't mind. Democracy is in INDIA.
At last, democracy in INDIA where majority Parlament members oppose FDI than also FDI in Retail Sector allowed & welcomed by govt.
If after 60 years an agricultural country cannot become efficient then how much time does it need? 51% leaves another 49% to be filled in by Indians. Refrigeration and other supply side fields are already open. The fact that you need to have large scale operations in order to use the investments in supply side infrastructure, has stopped most Indian companies in doing so. There is nothing stopping Indians from settling up business in that field. Apple products and more than half of our electronic products are from China. Should be ban everything? :)
The Swadeshi movement was for a totally different reason. Please re-read your history. In the era of globalization and liberalization, we cannot have a narrow minded approach.
I live in Gujarat and we have a lot of extra electricity. We sell it to other states. Getting electricity is Walmart's problem. Why are you worried about it?
I don't understand what you are trying to say with point 5 so I cannot reply to it. I think I have explained properly on how farmers will benefit.
How can you limit competition? Are you still in the licence raj? Increase in competition means survival of the fittest. It can be Walmart or it can be the local retailers.
If majority of parliament members oppose it then why are they not bringing a no confidence motion against the government? If the opposition is so strong, why don't they prove it?
Read my conculsion
Govt has already taken decision & if they not roll back than Wal mart not require 10 year to collapse retailer.
After couple of years, Indian Prime minister will also use twitter & say whatever he want to say to our Indian Citizen. Let hope he will not say whatever Barack Obama said in america after two decade of this policy.
Govt. taken a decision, they will follow, I have no problem. You favor govt policy, I have no problem as I am not a "RETAIL" trader or Middle man who is going to effect or having business loss in future.
Whatever I have said is my practical study of Retail Sector.
If anyone doesn't agree with me than I don't mind. Democracy is in INDIA.
I 100 % Agree with Lalit
There is a Big question of Retailer. Only 20-30 % Effect in Retail sector will lead to business losses.
Globalization in Retail sector leads us to greater economics & Social problems
A Well Balanced Indian Economy going to suffer due to this FDI in Retail
Still date whatever goods we import from China are mostly related with technology. The importer is a Retailer in India. So by selling this products they gain & profit. Profit goes to Our Retailer, depended on retailer & labor have a benefit.
But if wal mart sale this product direct in market imported from china than benefit goes only to Wal Mart & Chinese manufacturer. If retailer earned than he expenses this money on his livelihood or for his family, Retailer is also a consumer for other product so he is going to purchase other necessary product from other retailer so investment remain in India. But if wal mart earned money than where Wal mart going to expenses this money ? Wal mart come to India for profit purpose just as retailer, So Foreign Middleman leads us to many other problems.
No Study, No Discussion, "Our PM announce FDI in Retail"
No study. No loigic. "Our Ankit posts a comment". :P
As u reply, 51 % profit goes to out side india while 49 % goes to Indian Share holder.
It necessary to allow FDI In Retail ? Profit the company earned share retailers profit ! 4 crore people employed in Retail Sector. FDI in Retail will disturb all of them. Is it benefit to Indian Economy ?
I visited yr profile today. Yr age is 21 years. Have u any experience of Retail Sector? People employed there ? What will be losses to Retail Sector ? Please go today in Retail Market & see how competition is there. Almost 400 - 500 Shops for 1 lacs people only in Grocery sector. Did u mean to say that there is no competition in Retail Today ?
You haven't any answer of Mr Lalit points & also my points. 21 yrs younger person have a hot blood but & but not deep thinking about Retail Sector at all.
Creation of job must be new one to developed our Indian Economy. Here we want to create job but this new job creation going to effect whole Indian Economy structure - 5 crore Retailer.
Dear Sir,
51% foreign investment in multi-product retail trade has created a furor; economists, political activists and the so called well wishers of the country and its people have raised their voices in different ways to protect the interest of the common people without caring their present economic conditions.
The high voltage script on 51% multi-product foreign investment in retail trade, to many, is a political gimmick and not economics; to others the open door policy in retail trade will lead to unemployment and swallowing of small traders.
A farmer sells his produce at Rs.2.00 for which the ultimate consumer is to pay Rs.20.00. Who grabs this big chunk of exploits? When there is a bumper crop, the smile of a farmer turns to tears when he sells his produce at a throw away price; the middleman becomes the beneficiary. Is it not a bad economics?
From the village market or mundee, the produce travels and changes hands; the prevalent system mainly generates employments in unorganized sector at different levels. The farmer has no access for direct marketing. We are not concerned about them but cry to protect this middleman sector with a fear of throwing them out of the proposed system and to unemployment. We simply fail to appreciate loss in multiple transportation points, pilferage and handling loss; lack of preservation of food grains, vegetables and fruits are not reviewed.
It has been announced that 51% foreign investments will be used for developing cold storages, supply chains and retail stores. The procurement 30 % of products from SME sector will regenerate the market for this sector. The employments creation in retail trade chain cannot be ignored or overlooked; this aspect has not been talked about.We have closed our eyes regarding our poor infrastructure in terms of cold storage, warehousing, inadequate quality control and testing system, inefficient supply chain and involvement of middlemen and high transportation and inventory carrying cost; the money supply can revamp the process of economic growth.
We have also ignored the scope of processing industry in fruit and vegetables, meat and poultry, milk and milk products,, fisheries, plantation, grain processing; the opportunity for large investments in food and food processing technologies, skills and equipment, especially in areas of canning, dairy and food processing, specialty processing, packaging, frozen food/refrigeration and thermo processing may lead to growth in rural and semi urban region.
India is the world's second largest producer of food next to China.
The entrepreneurs in fragmented food processing sector are small in terms of their production and operations, and are largely concentrated in the unorganized segment. Their linkage with retail trade segment and awareness of modern technology will create new avenues. 30 % reservation for their produced goods is not a mean insurance against sale.
In West Bengal the proposed liberalization in retail trade segment may create immense potential for floriculture, horticulture, fruit processing, sericulture, aquaculture, development of medicinal plants, potato processing, pulses, jute, oilseeds, leather and leather products, food processing, vegetable preservation and processing, edible oil, gems and jeweler, rubber, palm oil, tea, confectionary; cold chain/warehousing, transfer of technology, strengthening infrastructure, raising productivity and generating new employment opportunities will be the added benefits.
The planners in West Bengal should look for a balance between the requirements of gobalisation and the needs of self-reliance; direct foreign investment proposal in retail trade should be treated as an economic objective and not as a political weapon. Earlier administration has mingled politics with economics; learning from past experience we should take the competitive advantages of foreign direct investment in retail trade. The overall objective of the State is to boost economic growth, improve physical and social infrastructure and reduce unemployment and poverty.
Political compulsion should not deprive the people of West Bengal of the benefit of economic liberalization of 1991 on India.
Yours faithfully,
Amar Lahiri Majumdar,
Kolcutta
26/2,PGM Shah Road Kolkata 700033 9831291699
Thank you for reminding me how in our country most people think that the weight of your arguments is directly proportional to the person's age. Unfortunately, its not! Just because I am 21 and you are elder to me doesn't mean you are always right. Please get rid of such misconceptions. Half of India is my age or younger. We are doing a much better job with the country that your generation ever did. Look at the points I have put forth instead of looking at my profile.
I have said it in the post and I will say it again, IT WILL NOT REPLACE THE KIRANA STORE OWNERS!! Most of the people who will go to Walmart already go to Big Bazaar or Reliance Fresh. 500 shops for 1 lakh people?Smells like disguised unemployment to me. Should we not eradicate it?
I am not saying there is no competition. I am saying more competition will only be beneficial to the customers. If small retailers are not fit enough to stay in the market then in a free market economy there is no point of carrying them along. We can't support incompetent businesses. Read my post and comments and please try to understand what I am trying to say. I have answered all your questions. You have to read my comments below yours to find it. That's kind of how it goes. I might not have 'in depth knowledge' of retail sector but I have something else, umm lets see, its called COMMON SENSE!
Organised multi brand retail IS a relatively new field. I thought people from retail would already know that.
P.S. : Reading comments like yours on a Sunday morning makes my already hot blood boil and become even hotter. Btw, all humans who are alive have hot blood. Science mein padha hoga.
If age is being considered by Mr. Lalit, then, evidently, all our ministers who have chosen this move are older than Mr. Lalit, and, hence, according to his own theory, more knowledgeable and far more experienced. ;)
And, not to forget, these ministers are helped by a no. of economists, IAS officers, etc. who maybe of our age. :D
So, it's really about who can see beyond the horizon, whether in their 20's or 60's.
Where does age come into play? Mr Ankit its never too late to learn something new, so you should take it as a deliberate attempt and should adore Napster's ideology for being so thoughtful and sincere.
Even you know that Napster has provided with firm and evident reasons regarding the topic of discussion and you are left with nothing to confront, but that should not agitate you to make comments on age or generation factor. Be magnanimous, perhaps the least thing which I would like to suggest you.
Apart from that, it would be better to accept changes and cohere with them for a better society. Points mentioned by Napster are quite logical and optimistic. I haven't gone through the nitty-gritty of this issue neither have I been in retail market for 10 or 100 years, but I am not resistant to change as you (Mr Ankit and Mr Lalit-with due respect) seem to be. I have learnt one thing in life that changes are destined to happen, transformations are an integral part of life and so we should accept them and come up with some optimism. There should be an urge from inside to take some calculative risks keeping in mind, the development and integrity of not just a nation but the entire human fraternity.
Thank you.
are.if middleman dumps farmers it is failure of govt.inspection authority.so govt. wants to wash there hands by allowing fdi in retail by leding us to the age of economic slavery.
- 30% of all raw material has be procured from India's small and medium industries
Obviously the cost price of this raw material (especially agricultural products) will be extremely low as compared to its selling price. What if this part is exported to their native countries and not to our country?
Is there any policy that Products should be sold under the same price internationally.
It'll be like buying petrol in Riyadh at Rs. 8.5/ltr and selling in India at Rs. 75/ltr.
PS: 51% fdi in retail is just the tip of iceberg, u never know what is coming and please get a medical checkup kiddo if ur blood boils for every comment then u will become an erupting volcano in just a matter of seconds.
It is shame to hear that Big and great country like India is not having infra structure to work as a good middle men between the farmer and customers and help to grow up.
Our people creating strategy and technology like ERP solutions for MNC’s including all this FDI retailers to do there business well .But we are not doing any thing for our country.
There will be no reduction in the prices for the consumers as the profits that used to go the middle men would now land in the hands of the foreign investors leaving Indian middlemen with nothing but to take the job given by these MNCs.
This decision will also effect the entrepreneurship capabilities of the youth of this country as most of them would be brought up with the idea of getting a job under such MNCs. The will to do something big and to create a MNC himself that could invest in other countries would really be demotivated.
Although farmers would gain from these MNCs, but these gains for the farmers would be restricted to a maximum of one year. The foreign investors initially attract farmers by offering them handsome price for their grow and sign a bond with them. The farmers being illiterate agree to the bonds from where the exploitation process starts. The MNCS then force the farmers to sell their grow at a price which they offer.
our masses ,but ultimately what happened ? So far as different countries r concerned ,they have very different kind of GOVERNANCE ,different kind of SELF-PRIDE ,& a different kind of COMMITMENT for their OWN COUNTRY which is lacking ( unfortunately ) in us .We were BEFOOLED earlier by EIC now by own leaders ( ironically dealers ).
thanx...
I am agree with you.Some are saying that why we should depend on foreign companies for improvement of our country's condition while we can change it to change our own perceptions? If it can be then where is the people's perception till implementation of fdi?
By allowing FDI we would be in profit like china,russia etc which are more developed than India.
There's one more problem ,that of the middlemen ,there are millions of middlemen who have this as their profession all of those people will suffer and ultimately will be left unemployed!
Indian government must increase opportunities for the poor farmers and not increase competition for them or else the poor will become more poor unfortunately