The retail industry is mainly divided into:-
1) Organized and
2)
Unorganized Retailing
Organized retailing refers to trading activities undertaken by
licensed retailers, that is, those who are registered for sales tax, income
tax, etc. These include the corporate-backed hypermarkets and retail chains,
and also the privately owned large retail businesses.
Unorganized retailing, on the other hand, refers to the traditional formats of low-cost
retailing, for example, the local kirana shops, owner manned general stores, paan/beedi
shops, convenience stores, hand cart and pavement vendors, etc.
FDI Policy with Regard to Retailing in India (GOVT. of INDIA Press
Release)
It will be prudent to look into Press Note 4 of 2006 issued by
DIPP and consolidated FDI Policy issued in October 2010 which provide the
sector specific guidelines for FDI with regard to the conduct of trading
activities.
a) FDI up to 100% for cash and carry
wholesale trading and export trading allowed under the automatic route.
b) FDI up to 51 % with prior
Government approval (i.e. FIPB) for retail trade of ‘Single Brand’ products, subject
to Press Note 3 (2006 Series)
c) FDI is not permitted in Multi
Brand Retailing in India. (Till Now)
But
Govt. is planning to :--
--FDI is
permitted up to 51%, with Government Approval Route and subject to
conditions in Multi- Brand retail
--FDI is permitted up to 100%, with Government
Approval Route and subject to
conditions in Single Brand Retail
SALIENT FEATURES:
-- Minimum
Investment: Minimum amount to be brought in by a Foreign Investor would be
USD 100 million.
--Unbranded
Products:
Fresh agricultural produce, including fruits, vegetables, flowers, grains,
pulses, fresh poultry, fishery and meat products, may be unbranded.
--Agricultural Products: First right to
procure agricultural products will lie with the Government
ü Locations for Retail Sales:
ü --Retail sales locations may be set up only in cities with a
population of more than 1 million as per 2011
ü Back-end Infrastructure:
- --At least 50% of total FDI brought in shall be invested in 'back-end
infrastructure.
IMPACT
OF FDI DOMESTIC RETAIL SECTOR:
Initially
this will wipe out lot of unorganized and organized retailers from the
business, because companies like WALMART , CARREFOUR, METRO, TESCO are very big
organization and they can provide better goods and even cheaper than a local
retailer due to deep pockets they have and their size which gives them a upper
hand. And if we talk about the creation
of Job then it’s not even close to the retail set up India have at present if
we go by statistics by National Sample Survey 2009-10 then around 40 million
people are being employed under retail sector in India. But these BIG Shops
will have a AVG. of 214 employees per
store by walmart and if we talk about others then it’s even lesser . And mind
it that it has only allowed in cities having 1 million population which counts
to 53. So definitely it will not create that number of the job what at present
scenario have.
But again being an
INDIA my mind turns back and think that how many times I myself prefer to buy
things from our near by Heritage fresher. If you track me then its would be
20-30 % times only. Unless we get something extra- ordinarily good we don’t
accept new thing, because by nature we are very conservative. Likewise as we are enjoying a weekly credit
facility from our local keerana wala then why would we prefer WALMART or any
other MART…Its again depends on person to person, our income level is going so
as our expenditure. But that point have some weight on it that it need to be a
big discount for me to go for a change.
IMPACT
ON THE FARMERS:
Farmers
is the main sufferer in the process of goods being produced and reaching to
your home . If he gets 3 rupee for his
produce then according to statistics you will buying it at 10 -12 rupees and
rest is eaten up by the middle man. After FDI this will help farmer in getting
a better price from the BIG CHAINS like WALMART and others. But farmers in
india are small, some have even less than 2 hectare of land and the brand like WALMART and others are
very BIG they have more buying power. This might worsen the situation of the
farmers.
This is confirmed by international experience. A large number of
members of the EU parliament adopted a declaration in February 2008
stating: “throughout the EU, retailing is increasingly dominated by a small
number of supermarket chains…..............
evidence from across the EU suggests large
supermarkets are abusing their buying power to force down prices paid to
suppliers (based both within and outside the EU) to unsustainable levels and impose
unfair conditions upon them”. This declaration came in the backdrop of protests
by farmers against supermarkets across European countries like France, Italy,
Netherlands, Belgium, Ireland and Hungary. The nature of the complaints were
similar: the giant retailers were squeezing the prices paid to the farmers for
products like milk, meat, poultry and wine, in some instances forcing them to
sell at below cost prices.
Government
need to look around it how it can carve out a way in between because both side
farmer is the sufferer and if this keeps on going like this then soon people
will stop doing farming.
BACK-END INFRASTRUCTURE:
Before Proceeding further lets be clear with the term BACK –END
INFRASTRUCTURE : Back-End
Infrastructure‟ will include capital expenditure on all activities, excluding
that on front-end units. For instance, back-end infrastructure will include
investment made towards processing, manufacturing, distribution, design
improvement, quality control, packaging, logistics, storage, ware-house,
agriculture market produce infrastructure etc. Expenditure on land cost and
rentals, if any, will not be counted for purposes of back-end infrastructure.
If
we talk in INDIAN context then we topped the ranking among the countries where
huge amount of food grains get wasted due to insufficient storage capacity. If
we go by numbers then INDIA has 5381 cold storage (much smaller
in size), with 4885 being in the private sector, 356 in the
cooperative
sector and only 140 in the public sector and India’s food grains production is
currently around 230 million tons and its total grain storage and warehousing
capacity is only around 50 million tons. That too not maintained properly.
This
FDI may help in built up the back-end infrastructure to a big extend. But a
question comes if a company is investing in multi-retail segment of your
country will also need infrastructure to operate, store etc……. So 50% money
they will invest in back-end infrastructure, no doubt but they will use that for
their own propose. Here, we need to see how much it will help for our domestic
producers.
RESPONSE:
Small
Traders and retailers are opposing it with a fear of being wiped out but on the
other hand farmers are supporting it with full mandate.
No
doubt political parties are playing their role as they do in every issue either
it be the ruling party or the opposition but before taking any decision our
government should make it such that it would be beneficial for our country and
society not the top brands who are waiting to tap the Indian market.
Our
neighbor, China opened up FDI in Retail in 1992,and the sector has seen rapid growth, against the
backdrop of increased market consolidation, higher production efficiency
enabled by rising investments in rural infrastructure, and booming exports made
possible by the setting up of new supply chains.(by The Hindu).
Left
and Opposition are opposing it and their point is that it will lead to
unemployment, monopoly by BIG multinational and these will affect India in long
run.
All
responses are on table and India also has many example of China, Indonesia etc.
from which it can get a clue and decide better. JAI HIND!!
