The Government decided (now on hold till further communication) to
allow Foreign Direct Investment (FDI) upto 51% in multi brand
retail. Till now FDI was not allowed in multi brand retail but now they can
setup stores in the country with the local partner.
This decision is an enabling policy that will open up new
windows of opportunity to modernize the retail sector particularly for
agricultural products and the small-scale sector.
The
benefits would be for all:
v
The farmer: will get a better price for their produce as middlemen will
be removed and retailers will buy directly from
farmers. Losses from wastages of perishable goods will come down.
v
The small scale sector: will be benefited with cheap and better quality
source for their products and larger customers.
v
Consumers: The entry of global players will promote existing traders and
retail outlets to upgrade and become more efficient, thereby providing better
services at competitive price to the consumers as also better remuneration to
the producers from whom they source their products.
This is also one of the most effective ways to tackle rise in food
prices and inflation due to availability of food items on
lower prices.
Today India
This will bring huge employment opportunities in
agro-processing, sorting, marketing and the front end retail business. As
per some estimates upto 10-11 million jobs will be created in coming
years.
Government has provided safeguards to protect national interest
such as:
Ø Minimum investment by the global retailer will be $ 100 million
and 50% of which will be in backend infrastructure that will control wastage
and help local farmers. Backend infrastructure will be in or near villages and
will be of immense value for rural economy.
Ø
It has been made mandatory that 30% sourcing will be done from
Indian small industry. This will promote local manufacturing, as Indian small
industries will feel encouraged to expand capacities in manufacturing thereby
creating more employment and also strengthening the manufacturing base of the
country.
Ø
These stores can be set up only in cities with the population of
more than 10 lakh. This provision along with the requirement of
master/zonal plans will make sure that small retailers are not
affected. Moreover small retailers can benefit from sourcing their
products from deep discount wholesale cash-and-carry big retailers. This
will improve quality of their product and reduce their cost.
Ø
In order to ensure supply to ration shops (PDS) government will
have the first right to the procurement of agricultural products. This is
important from food security point of view also.
Some people fear that big retailers will destroy small traders by
keeping low prices initially (predatory pricing). However, As the policy
will be implemented in only 53 cities (with population over 10 lakhs)
which will make it difficult for big retailers to crush competition. Although,
In many developing countries like China, Thailand, Indonesia, Brazil,
Argentina, and Singapore, where 100% FDI is allowed, small retailers are
successfully co-existing with big retailers.
