The whole FDI in retail fiasco has been topping news papers and various magazines almost all through this year. In September this year, finally, the Indian Government did approve FDI entry into retail but with a 51% cap! There are varied opinions of people about this, the most important being, this would help bring in the economics of market efficiency through a better and more competitive market. This would be the very basis for the premise for capitalisam; so that the Indian peers could work towards working more efficiently. Such a system would pose challenge for the otherwise lazy Indian marketeers. From the individual consumers’ viewpoint, this would help them by getting better prices of goods along with the promises of assured quality.
Something that constantly knocks my mind, when I think of FDI coming in India, is its timing. Why has this to be accepted when our country is facing economic distress and not during 2007 or even 2010, when we had better numbers to showcase to the World? Why did FDI not come in when the world was under a recession and we were the better markets internationally?
Even before this news was formally announced I have been trying to find reasons behind this “51% “cap, other than of course, those pertaining to ownership issues. How would a roadside vendor or a kirana shop owner still benefit with the 49% that rests with an Indian partner. Not that the Indian partner is making promises to share his profits with them or entering into contracts with them as middle-men, and promising assured sales.
Retail by the very virtue of its business model, and especially International giants, like Walmart or Carrefour, obviously are assured of satisfactory sales given their low priced offerings. It is a pure play of essential demand, and works on the economics of necessity and hence, it will be very easy for these large players to generate returns by playing with large volumes and low margins. How can a kirana shop owner or a street vegetable vendor ever compete with such a business model?
If your excuse is employment do you really think such giants will ever employ these non, or under-educated people? Their bare requirement for hiring would be English speaking and class twelve passé people. Now how many “modi” walas, or your “sabziwala” even understand broken English? Speaking the same fluently is hence, out of the question! If the argument is about involving the farmers as suppliers, I wonder which Indian, can beat the robust supply chains and cold storage facilities of these mammoths. What is the guarantee that pressures from them along with bureaucratic policies, will not force the farmers to under price their produce?
However, it is upon the individual state Governments, whether to allow these foreign players to enter.
Radhika Bhalotia
Editor