Edunology - Saumya Aggarwal

FDI in Indian Retail: Multiple perspectives

What is Indian Retail market shape?

Predominately, The Indian retail sector is unorganised. It consists of "kirana" stores or small stores in every corner of the road. They are typically managed by single owner or family members. These are pan shops, general stores, convenience stores and multi commodity vendors.

FDI in Retail Approval

Henry Ford, the genius inventor once famous said,"Don't find fault, find a remedy”. Is it the mantra followed by Congress, mind you not UPA as all parties are not together on FDI. India’s Cabinet unveiled plans to liberalize foreign direct investment in a broad range of sectors including multi-brand retail, a move that could allow foreign supermarkets into the country.

For many, this is seen as bold move from scam ridden government, indicating slowing economy might actually take Congress ultimate seat from New Delhi.

Different perspectives

Adi Godrej, president of the Confederation of Indian Industry, welcomed the move and said publicly government has “restarted the reform process.” He further added this is a major step in the right direction and “this will not only end a long standing uncertainty in policy making but also boost investors’.

R.V. Kanoria, the president of the Federation of Indian Chambers of Commerce and Industry, said  FDI in retail announcement “reflects the resolve of the government to usher in a retail revolution in the country and also signal to the investor community that India is committed to furthering reforms.” He said this move will infuse new technology and help improve supply-chain infrastructure.

Kishore Biyani, managing director of Pantaloon Retail (India) Ltd ., the country’s biggest retailer by market capitalization and sales, said: “The opening up of the multi-brand sector to foreign direct investment will provide us opportunities to bring in foreign investors in various business like our home retail, electronic retail, food retail businesses.”

Leading consultancy firm, PricewaterhouseCoopers India, estimates that opening up the retail sector will lead to significant improvement of supply-chain infrastructure, which will help reduce food waste by 30% to 40%.

Mukhtar Abbas Naqvi, a spokesman for the main opposition Bharatiya Janata Party, bashed Congress move by saying FDI will hurt small traders.  “We are in favor of reforms but such reforms will not help our troubled economy. Unfortunately the government is not sensitive to small businesses that will be adversely affected by this move. They seem to have rushed into this decision without much thought,” added Mr. Naqvi.

My view on FDI:

- Organized players will rope in huge investments which will help India in longer run as "kirana" shops can not put such massive investments.

- Significant improvement in supply chain infrastructure which will eliminate wastages and enhance operational efficiencies.

- It will create millions of jobs from front end to back end helping youth getting food at end of the day.

- Various middlemen will be made ridundent and hence farmers & end consumers would be happy.

- These organised relatiers are registered hence pay sales tax, income tax, octroi and other government duties which will boost government revenue (which can ulitised for India's growth if Congress alliances do not end up eating all of the money through corruption).