100% FDI in retail in India, good or bad...

There is a lot to be said for big retail to come to India, but we cannot simply be taken in and mimic something which is being pushed down our throats because those who make the policy appear to not have the faintest clue on how retail really works in India

If there were clear answers in black and white to the question, there would really be no need for any debate on the issue, but the truth is that it is simply not that simple. On a philosophical and emotional level, the answer could be that any form of foreign participation in a domestic market is rife with dangers of the colonialism sort, but in this day and age, while the core concept of being wary of foreign dominance may still be true, the fact remains that there are plenty of ways to ensure that it works on a win-win basis for all concerned.

The main problem with the current status of foreign direct investment (FDI) in retail in India is that it does not provide a level playing field to other players of the domestic and small sort. In addition, it appears to take a rather naive and simplistic view on certain aspects, which like myths being repeated, tend to become urban legends. On the other hand, no country can afford to take on an isolationist approach.

To start with, it may help to go through the background and policy note on the Cabinet decision on FDI in retail, as put up on various places on the internet. (Facebook, PIB)

As this writer sees it, with a holistic view of the subject and not just based on jingoism of the “burn down the malls” (right view) and “bad for farmers” (left view) sort, but on rational evaluation of larger issues, there are some points which need to be straightened out. Large retail is inevitable, and that is a simple truth, but there has to be larger perspective for public good which seems to be missing from this policy. The people of India come first, including those who want a better product or service buying or selling experience, and at the end of the day it is their wallets which will decide where they go.

But at the same time, the government, with the policy as outlined above, cannot sell the baby with the bath-water, and make things worse. Some suggestions:

1) The present Agriculture Produce Market Committee (APMC) Act requires urgent revamp if we really want to help the rural and agricultural sectors with a better go to market scenario. This, along with rapid introduction of the goods and services tax (GST) as well as ease of inter- and intra-state movement of foodgrain, agri products and fresh produce, would do more to improve matters, as well as do wonders for our economy in a variety of ways—most of all in terms of controlling prices as well as reducing storage and transit losses.

2) The policy shown above makes a case that “brands” by big FDI retailers need to be carried across borders without in any way making it clear that the quality of those brands needs to be same across borders, too. As of now we see that with these manufacturers and retailers there is one lower quality for sale in India and there is a better quality for sale in developed countries—case in point being soft drinks, processed foods, confectionery, electronics, motor vehicles and others. If anything is by way of a different quality for India for price or other reasons, then let it be clearly marked as such.

3) Specifically in the case of packaged and processed foods, the policy does not say anything about adherence to best case scenarios in terms of labelling of ingredients and avoiding misleading marketing ploys, thereby leading to a situation where outright dangerous products are foisted on Indian consumers. The amount of product detail available for consumers in developed countries must be matched for India, too. India cannot become a vast chemistry lab for processed foods or anything else.

4) More empirical data needs to be provided on subjects like “improvement in supply chain”. India is the country where the passenger rail ticket deliveries, fresh hot cooked food by dabbawallas and diamonds as well as other precious stones by angadias have set better than global standards in supply chains, so the same standards need to be quantified and applied to those seeking 100% FDI in retail. It is not too much to ask for them to match the Indian standards—unless those who made the policy are ashamed of our prowess.

5) The investments in retail by the FDI route, when they come, should come only through a short-list of recognised tax adherence countries. The misused option of FDI coming in through known or suspect tax havens needs to be blocked—firmly. Likewise, full disclosures of the strictest sort need to be made on who the investors are—again, these cannot be suitcase corporate identities hiding behind consultants and banks in shady tax havens or other countries. Unlike what happened in, for example, airlines, Indians need to know who is investing and from where. And in case there are legal issues, then we need to know who the faces are who will go through the Indian legal system, unless those who made the policy are ashamed of our legal system.

6) The payment processing and cash management as well as tax adherence part of this industry, both in terms of procurement and sale, need to be through the Indian banking system. And by fully transparent methods, so that float as well as control remains in India at all times, as is the case in developed countries. Proprietary payment processing and cash management methods of the sort that take this control out of India need to be firmly denied—the FDI retailer needs to be on a level playing field here with other Indian domestic retailers—insistence on co-opting RuPAY needs to be part of this policy.

7) Since such huge benefits are being provided to these FDI retailers by India, it must be imperative that these large retailers subscribe and adhere to the RTI Act of India 2005 from day one, along with their first application. This will be in addition to all other requirements that other large retailers in India, like government controlled Canteen Stores Department (Armed Forces), Super Bazaar (ministry of urban development), central government and state government co-op stores, Khadi Bhandars, state emporia and others adhere to—including best of breed hiring policies.

8) It appears that the policymakers subscribe to the view that more wastage is generated by the present retail system in India and that FDI will reduce wastage. Bearing in mind the huge problem that developed countries have with handling wastage especially of the packaging sort, it will be necessary to quantify this wastage from the outset itself, instead of propagating further the myth that the Indian system generates more waste. And then control the said wastage, again, by defined means.

9) Supermarket design in India should be defined in such a way that fresh food and produce needs to be in front, unlike in other “big box” shops where it is right at the back or hidden along the sides, forcing people to walk through row after row of packaged and processed foods. This is very important if FDI in retail really means it when they say that they wish to bring the farmer’s produce to the customer with minimal transaction losses in between of the multiple middlemen sort.

And finally, most importantly, 

10) The “big box” FDI model in retail cannot be the reason to do away with the small shopkeeper earning his livelihood on the peripheries of the traditional marketplaces. The big retailer will have to, as policy, provide for space as well as timing to set up options like weekly ‘haats’ and “farmer's markets”, either in parking lots or in specially designated stalls set aside for this.

Certainly, there is a lot to be said for big retail to come to India, but we cannot simply be taken in and mimic something which is being pushed down our throats because those who make the policy appear to not have the faintest clue on how retail really works in India. The concept of big retail is inevitable, in some ways it is already there, but the way this present policy has been structured appears to be a sell-out of the worst sort—designed to destroy the nation’s core competencies in trading.

It will be a shame, as well as a major electoral issue, if the present policy is permitted to proceed along its current path. Because it is wide open and visible that it appears that the present retail FDI policy of the present government is to try and make big retail the only port of call for both seller and buyer. That, most certainly, spells death for the country’s independence. 

User

COMMENTS

Oxizone Aromas

4 years ago

FDI is good for common man in INDIA..its true tht small shopkeepers will be affected but common its time to develop country, people will themselves be able to coop up and eventually find them in a very comfortable way living quality and transparent lives.

radheshyam agrawal

4 years ago

No FDI in retail should allowed because lakes of families will loose there jobs and unemployment of dependent will create a big problem before country

radheshyam agrawal

4 years ago

No FDI in retail should allowed because lakes of families will loose there jobs and unemployment of dependent will create a big problem before country

Shashikant

4 years ago

Hello ,
I'm a student of M.Sc statistics I would like to do a project on FDI in retail sector in india, so I have to do a survey, I prepared questionaries I need some more, if u have some suggestions or any idea about questionaries then please send your ideas or questionaries to my mail:

shashi.pattankar@gmail.com

Thanks,

anurag

4 years ago

beautifully written..

shivam

4 years ago

good

Joy

4 years ago

Retail FDI is good for common man - because it will bring good quality products and services to consumers at low cost.

Bapina Sahoo

4 years ago

we support it way for our economy development.

pk

4 years ago

dear Mr Malik

thanks for thought provoking artilcle.

i wonder if all the persons behind VISA/ Matercard and such channels belong to particular region..europe-scandanavian part..

it seems to be too good a place to live ..also some companies are sperad all over the world since early 20 th century.it is real globalisation , when thjey have taekn risk and started operation in most underdeveloped parts, now reaping benefits..

you will find some of them in Pimpri-chinchwad area, started in 1960's..
INVESTOR one of the groups??

fascinating and chilling also..

REPLY

malq

In Reply to pk 4 years ago

The "benefits" as we say them, are also towards converting the hot money in our economies, a major part of which are from the narcotics trade. For the last 3 centuries or so this trade has been growing as a part of the world economies, and today it is said to be equal to the oil economy as well as transportation economy put together - and more. Whether it was the Europeans, Americans, Indians or Chinese, fact remains, history as well as current are full of these specific groups of people, and the next step is to transfer the strengths of these narco based economies to organised and often centralised religions.

So whether in Pimpri-Chinchwad, or Rome, or London or wherever else, the eventual benefit funnels down into a handful of people.

We need to spread this benefit wider, for maximum benefit, hopefully.

Hope this helps.

saket

4 years ago

fdi must not in india

Prakash Bhate

4 years ago

When the economy was liberalised in 1991 people said that will ring the death-knell for the Indian industry. It not only survived, it went global. When McDonalds was let in the country, people said that local eateries will be finished because they will not be able to take the advantage of economies of scale. It was McDonalds that had to come out with McTikki and other Indianised items. Local eateries are still getting their customers. When product patents were allowed in the pharma sector, people said that the Indian pharma industry will go bust. It finally started investing in research and is doing well. When banks were computerised people came out on the streets saying that their jobs will go away. Today, one can bank from home. Bank staff still go on strike, but that's another story! Had the automobile industry not been liberalised we would still be driving Ambassadors and Fiats and Chetaks after waiting in a queue for 3-4 years. India has 120 crore people. FDI in retail will be a drop in the ocean. Why are we so scared?

REPLY

Harish

In Reply to Prakash Bhate 4 years ago

Dear Prakashbhai,

Yes you are right, but on previous experience we can not blindly gamble and put crores of lives into the game. Yes, mostly we won our inc not only survived but they won but there are some negative examples like parle products(Thumbs Up{No. 1 bevarage of India). Yes may be thanks to reforms today we are enjoying latest technology(we are assuming that). But Crores of people loosing their earnings, most of the people forced to left their business and join jobs. We can not afford Gulams.

malq

In Reply to Prakash Bhate 4 years ago

Dear Prakash Bhate ji, thank you for writing in, but this article is now about being scared at all.

The points raised and being debated are more along the lines of what is good for the country as a Nation - or not.

AND there needs to be a quid-pro-quo between the investor's country as well as India.

Humbly submitted/VM

AMAR NATH TANDON

4 years ago

there must be a good objective behind every reform / policy. the hill task before the govt was to reduce the pressure of rising prices specially of food items ,with this objective govt forwarded the idea of fdi in retail this idea was rejected by all at initial level it self by all.govt thought and advocated that fdi will bring lot money in form of technology and goods in to the indian economy. but govt was not closing that who and what shall be taking out of the country. they gave the example of china. Please look into the super stores of US they are all selling china made articles in so called low price stores that is china made goods are being sold every where hence china is benifited. If indian market is opened for them again china will be benifited as americans have installed lot of huge production units there. Hence it is very necs that to balance the inflow and out flow of capital / money we should ask them to take away our produce in equal amount of their import. This facilitate our producers to improve quality and productivity reduce wastage fdi will help them in doing so.instead of putting their own manufacturing units this will be easier.on the other hand indian consumer will get cheap and different variety goods.

AMAR NATH TANDON

4 years ago

fdi in retail in its present form shall effect india by a loss of Rs25 Lacs corore/year it will benifit china by Rs15 Lacs copore /year for next 10 years. USA will get a share of Rs4 lacs corore /year. job creation nearly 50 Lacs job loss 3-4 corore. Change 90 % local purchasean / export compusory to retailers equal to import in dollars.

Rajan Vaswani

4 years ago

The insistence on sticking to FDI in retail by the Congress party is to ensure that real estate stays firm. The plan that a Walmart will open next to upcoming projects will enable the builders and the politicians who have heavy investments with those builders, be able to get a quick ticket to stay above board. Else, the state of real estate is nothing but that of a sinking ship. Congress is killing 3 birds with one stone. Black money bill, Lokpal Bill and igniting real estate market once more.

pinakin mamtora

4 years ago

Why is our PM 'FIRM' on matters that are positive for the USA? Many years back, he was FIRM on the Nuclear Bill. Today, he is FIRM on FDI in retail. When will he be a MAN by being FIRM on enacting a REAL Lokpal Bill as suggested by Team Anna?

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