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 Globalization for the Good
 
Is FDI in retail a good idea?
Business Standard, India Wednesday, July 14, 2010


Large investments in infrastructure will help farmers and will boost exports in a big way. It is unlikely organised retail will get more than 15% of the market even after a decade.This will make organised retail more efficient and help farmers. Kiranas have natural advantages that will protect them to an extent, but if they are not modernised, the employment impact could be large, writes Govind Shrikhande in Business Standard.

Foreign direct investment (FDI) in the retail sector is currently a hot topic of debate. It is also a sensitive topic considering that the stakeholders in this case are consumers, local retailers and global retailers.

The recent announcement by the Department of Industrial Policy and Promotion (DIPP) to discuss various issues related to FDI is a welcome move. It has set the tone for inviting all the stakeholders to comment on various aspects of the move.

Let’s examine the key aspects related to this decision. To start with, why bring FDI in any sector? Clearly, FDI benefits customers, economy and infrastructure. Our experience in telecom, automobile and insurance sectors clearly shows the success of the FDI policy. With large-scale investments in each of these sectors, customers are getting the best of services and products, and the resultant competition is spurring the players to improve further. Even today, after the sector was opened up, the largest car brand continues to be an Indian one.

... ...

FDI in retail will have a far-reaching impact on various aspects of the economy. If rolled out in phases and with proper checks and balances, it will give a boost to the economy. Customers will get a wide assortment of quality goods at reasonable prices. They will be able to buy the best brands across various categories.

Large investments in infrastructure would lead to a rise in farm productivity, manufacturing and food processing as well as cold storage facilities. This would cut down wastage and spur growth in employment, exports and GDP. It can also help revive the textile and handicrafts sector. With appropriate controls in place, our exports can double in three years.

The introduction of technology and good management practices will improve product availability, reduce wastage, improve quality and customer satisfaction.

...

The biggest argument against FDI is centred on its negative impact on small, unorganised retailers. We believe that the unique model of retail in the country will not only survive FDI but also prosper once it’s allowed.

...

There isn’t much space available for large retailers to enter the most crowded areas within most of the big cities. Therefore, large-scale retail stores will always remain a destination for big buys. Customers will have to make an effort to reach them. And with difficult road connectivity and infrastructure in cities, this will always remain a challenge.

Also, the ingenuity of Indian entrepreneurs has no match. Big retailers will find it difficult to measure up to services like free home delivery.

...

FDI should bring in investments in technology, infrastructure, cold storage facilities, distribution and manufacturing.

...

In addition to this, India can also become a shopping destination for the world, leading to further boost to the economy.

This article was published in the Business Standard on Wednesday, July 14, 2010. Please read the original article here.
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