fdi retail mkt

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ImpactofForeignDirectInvestment(FDI)onIndianEconomyDefinitionForeigndirectinvestment(FDI)orforeigninvestmentreferstothenetinflowsofinvestmenttoacquirealastingmanagementinterest(10percentormoreofvotingstock)inanenterpriseoperatinginaneconomyotherthanthatoftheinvestor.Itisthesumofequitycapital,otherlong-termcapital,andshort-termcapitalasshowninthebalanceofpayments.Itusuallyinvolvesparticipationinmanagement,joint-venture,transferoftechnologyandexpertise.TherearetwotypesofFDI:inwardforeigndirectinvestmentandoutwardforeigndirectinvestment,resultinginanetFDIinflow(positiveornegative)andstockofforeigndirectinvestment,whichisthecumulativenumberforagivenperiod.Directinvestmentexcludesinvestmentthroughpurchaseofshares.FDIisoneexampleofinternationalfactormovement.TypesAforeigndirectinvestormaybeclassifiedinanysectoroftheeconomyandcouldbeanyoneofthefollowing: anindividual; agroupofrelatedindividuals; anincorporatedorunincorporatedentity; apubliccompanyorprivatecompany; agroupofrelatedenterprises; agovernmentbody; anestate(law),trustorothersocialinstitution;or anycombinationoftheabove.

Theforeigndirectinvestormayacquirevotingpowerofanenterpriseinaneconomythroughanyofthefollowingmethods: byincorporatingawhollyownedsubsidiaryorcompany byacquiringsharesinanassociatedenterprise throughamergeroranacquisitionofanunrelatedenterprise participatinginanequityjointventurewithanotherinvestororenterpriseForeigndirectinvestmentincentivesmaytakethefollowingforms: lowcorporatetaxandincometaxrates taxholidays othertypesoftaxconcessions preferentialtariffs specialeconomiczones EPZExportProcessingZones

BondedWarehouses Maquiladoras investmentfinancialsubsidies softloanorloanguarantees freelandorlandsubsidies relocation&expatriationsubsidies jobtraining&employmentsubsidies infrastructuresubsidies R&Dsupport derogationfromregulations(usuallyforverylargeprojects)ForeignDirectInvestmentsinIndiaStartingfromabaselineoflessthan$1billionin1990,arecentUNCTADsurveyprojectedIndiaasthesecondmostimportantFDIdestination(afterChina)for

transnationalcorporationsduring2010-2012.Asperthedata,thesectorswhichattractedhigherinflowswereservices,telecommunication,constructionactivitiesandcomputersoftwareandhardware.Mauritius,Singapore,theUSandtheUKwereamongtheleadingsourcesofFDI.FDIin2010was$24.2billion,asignificantdecreasefromboth2008and2009.ForeigndirectinvestmentinAugust2010dippedbyabout60%toaprox.$34billion,thelowestin2010fiscal,industrydepartmentdatareleasedshowed.Inthefirsttwomonthsof2010-11fiscal,FDIinflowintoIndiawasatanall-timehighof$7.78billionup77%from$4.4billionduringthecorrespondingperiodinthepreviousyear.


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TheworldslargestretailerWalMarthastermedIndiasdecisiontoallow51%FDIinmulti-brandretailasafirstimportantstepandsaiditwillstudythefinerdetailsofthenewpolicytodeterminetheimpactonitsabilitytodobusinessinIndiImpacton51%FDIonIndiaThedecisiontoholdbackFDIinmulti-brandretailwillhaveastrongimpactonthedomesticandforeigninvestorsentiment,anotherchamber,theConfederationofIndianIndustry(CII),saidinarelease.Wefirmlyhopethatthiswouldnotbearollbackandaquickconsensusisreached,CIIDirectorGeneralChandrajitBanerjeesaid.Describingthevoltefaceasacaseofmissedopportunity,AssochamSecretaryGeneralDSRawatsaid,Itwillsendaverynegativemessagetoforeigninvestors.RawatsaidFDIinmulti-brandretailcouldhavecreatedover10millionjobsinthreeyears,curbedwastageoffarmproductsandbenefitedfarmersthroughbetterpricesfortheirproduce.FICCIurgedthegovernmenttomoveaheadwiththisprogressivereformandproposedsolutionslikeconsideringamaximumof49percentFDIinmulti-brandretailandincreasingthepercentageofsourcingfromthesmallscalesector,whichwasproposedtobefixedataminimum30percent.ThegovernmentwasforcedtoputitsdecisiontoallowFDIinmulti-brandretailonholdinviewofstiffoppositionfromUPAallyTrinamoolCongressandotherpoliticalparties.ImpactinTamilNaduChennai,Nov27:Opposingthegovernmentpolicyofallowing51percentFDIinmu

lti-brandretailsectorinIndiaTamilNaduChiefMinisterJJayalalithaaonSunday(today)saidthatshewouldnotallowmulti-brandglobalpalyertosetuphypermarketsinTamilNadu.Jayalalithaafurthersaidthatgovernmentshouldreverseitsilladvisedmoveasitwillmonopolisethemarket,exploitfarmersandconsumers.IamconstrainedtostatethatmygovernmentwillnotallowthemultibrandglobalplayersaspermittedunderthenewpolicytosetuptheirhypermarketsinTamilNadu,Jayalalithaadeclared.ThegovernmentnewFDIretailpolicytoallow51%foreigndirectinvestment(FDI)inmulti-brandretailsegmentwillpermitworldstopretailgiantlikeWalmart,CarrefourandTescotosetupmarketinthecountry.Earlier,suchretailerswerenotallowedtocoductretailbusinessinIndia.CurrentIndianMarketSituation

RetailinginIndiaisoneofthepillarsofitseconomyandaccountsforabout15%ofitsGDP.TheIndianretailmarketisestimatedtobeUS$450billionandoneofthetopfiveretailmarketsintheworldbyeconomicvalue.Organisedretailing,absentinmostruralandsmalltownsofIndiain2010,referstotradingactivitiesundertakenbylicensedretailers,thatis,thosewhoareregisteredforsalestax,incometax,etc.Theseincludethepublicly-tradedsupermarkets,corporate-backedhypermarketsandretailchains,andalsotheprivatelyownedlargeretailbusinesses.Unorganisedretailing,ontheotherhand,referstothetraditionalformatsoflow-costretailing,forexample,thelocalmomandpopstore,ownermannedgeneralstores,paan/beedishops,conveniencestores,handcartandpavementvendors,etc.Supermarketsandsimilarorganizedretailaccountedforjust4%ofthemarketin2008.Untilrecently,regulationspreventedmostoftheforeigninvestmentinr

etailing.Someretailsfacedcomplyingwithoverthirtyregulationssuchassignboardlicencesandanti-hoardingmeasuresbeforetheycouldopendoors.Therearetaxesformovinggoodstostates,fromstates,andevenwithinstatesinsomecases.However,theIndiangovernmenthasbeenopeningtheretailmarketandsimplifyingregulations.InNovember2011,IndiancentralgovernmentannouncedmajorreformspavingwayforgiantssuchasWalmart,CarrefourandTesco,aswellsinglebrandmajorssuchasIKEA,Nike,andAppletoenteroneofthefastestgrowingretailmarketof1.2billionpeople.ThisannouncementimmediatelycausedintenseactivismbothinoppositionandinsupportwithinIndia.On7December2011,Indiangovernmentconcedingtotheopposition,announceditissuspendingtheret


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ailreformstillitreachesaconsensus.MostIndianshoppingtakesplaceinopenmarketsormillionsofsmall,independentgroceryandretailshops.Shopperstypicallystandoutsidetheretailshop,askforwhattheywant,andcannotpickorexamineaproductfromtheshelf.Accesstotheshelforproductstorageareaislimited.Oncetheshopperrequeststhefoodstapleorhouseholdproducttheyarelookingfor,theshopkeepergoestothecontainerorshelfortothebackofthestore,bringsitoutandoffersitforsaletotheshopper.Oftentheshopkeepermaysubstitutetheproduct,claimingthatitissimilarorequivalenttotheproducttheconsumerisaskingfor.Theproducttypicallyhasnopricelabelinthesesmallretailshops;althoughsomeproductsdohaveamanufacturedsuggestedretailprice(MSRP)pre-printedonthepackaging.Theshopkeeperpricesthefoodstapleandhouseholdproductsarbitrarily,andtwoconsumersmaypaydifferentpricesforthesameproductonthesameday.Priceissometimesnegotiatedbetweentheshopperandshopkeeper.Theshoppersdonothavetimetoexaminetheproductlabel,anddonothaveachoicetomakeaninformeddecisionbetweencompetitiveproducts.Indiasretailandlogisticsindustry,organizedandunorganizedincombination,employsabout40millionIndians(3.3%ofIndianpopulation).ThetypicalIndianretailshopsareverysmall.Over14millionoutletsoperateinthecountryandonly4%ofthembeinglargerthan500sqft(46m2)insize.Indiahasabout11shopoutletsforevery1000people.VastmajorityoftheunorganizedretailshopsinIndiaemployfamilymembers,donothavethescaletoprocureortransportproductsathighvolumewholesalelevel,havelimitedtonoqualitycontrolorfake-versus-authenticproductscreeningtechnologyandhavenotrainingonsafea

ndhygienicstorage,packagingorlogistics.Theunorganizedretailshopssourcetheirproductsfromachainofmiddlemenwhomarkuptheproductasitmovesfromfarmerorproducertotheconsumer.Theunorganizedretailshopstypicallyoffernoafter-salessupportorservice.Finally,mosttransactionsatunorganizedretailshopsaredonewithcash,withallsalesbeingfinal.Between2000to2010,consumersinselectIndiancitieshavegraduallybeguntoexperiencethequality,choice,convenienceandbenefitsoforganizedretailindustry.Growthover1997-2010Indiain1997allowedforeigndirectinvestment(FDI)incashandcarrywholesale.Then,itrequiredgovernmentapproval.Theapprovalrequirementwasrelaxed,andautomaticpermissionwasgrantedin2006.Between2000to2010,Indianretailattractedabout$1.8billioninforeigndirectinvestment,representingavery

small1.5%oftotalinvestmentflowintoIndia.Singlebrandretailingattracted94proposalsbetween2006and2010,ofwhich57wereapprovedandimplemented.Foracountryof1.2billionpeople,thisisaverysmallnumber.SomeclaimoneoftheprimaryrestraintinhibitingbetterparticipationwasthatIndiarequiredsinglebrandretailerstolimittheirownershipinIndianoutletsto51%.Chinaincontrastallows100%ownershipbyforeigncompaniesinbothsinglebrandandmulti-brandretailpresence.Indianretailhasexperiencedlimitedgrowth,anditsspoilageoffoodharvestisamongstthehighestintheworld,becauseofverylimitedintegratedcold-chainandotherinfrastructure.Indiahasonly5386stand-alonecoldstorages,havingatotalcapacityof23.6millionmetrictons.However,80percentofthisstorageisusedonlyforpotatoes.Theremaininginfrastructurecapacityislessthan1%oftheannualfarmoutputofIndia,andgrosslyinadequateduringpeakharv

estseasons.Thisleadstoabout30%lossesincertainperishableagriculturaloutputinIndia,onaverage,everyyear.Indianlawsalreadyallowforeigndirectinvestmentincold-chaininfrastructuretotheextentof100percent.Therehasbeennointerestinforeigndirectinvestmentincoldstorageinfrastructurebuildout.Expertsclaimthatcoldstorageinfrastructurewillbecomeeconomicallyviableonlywhenthereisstrongandcontractually-bindingdemandfromorganizedretail.Theriskofcoldstoringperishablefood,withoutanassuredwaytomoveandsellit,putstheeconomicviabilityofexpensivecoldstorageindoubt.Intheabsenceoforganizedretailcompetitionandwithabanonforeigndirectinvestmentinmulti-brandretailers,for


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eigndirectinvestmentsareunlikelytobeginincoldstorageandfarmlogisticsinfrastructure.Until2010,intermediariesandmiddlemeninIndiahavedominatedthevaluechain.DuetoanumberofintermediariesinvolvedinthetraditionalIndianretailchain,normsarefloutedandpricinglackstransparency.SmallIndianfarmersrealizeonly1/3rdofthetotalpricepaidbythefinalIndianconsumer,asagainst2/3rdbyfarmersinnationswithahighershareoforganizedretail.The60%+marginsformiddlemenandtraditionalretailshopshavelimitedgrowthandpreventedinnovationinIndianretailindustry.Indiahashadyearsofdebateanddiscussionsontherisksandprudenceofallowinginnovationandcompetitionwithinitsretailindustry.NumerouseconomistsrepeatedlyrecommendedtotheGovernmentofIndiathatlegalrestrictionsonorganizedretailmustberemoved,andtheretailindustryinIndiamustbeopenedtocompetition.Forexample,inaninvitedaddresstotheIndianparliamentinDecember2010,JagdishBhagwati,ProfessorofEconomicsandLawattheColumbiaUniversityanalysedtherelationshipbetweengrowthandpovertyreduction,thenurgedtheIndianparliamenttoextendeconomicreformsbyfreeingupoftheretailsector,furtherliberalisationoftradeinallsectors,andintroducinglabormarketreforms.SuchreformsProfessorBhagwatiarguedwillaccelerateeconomicgrowthandmakeasustainabledifferenceinthelifeofIndiaspoorest.A2007reportnotedthatanincreasingnumberofpeopleinIndiaareturningtotheservicessectorforemploymentduetotherelativelowcompensationofferedbythetraditionalagricultureandmanufacturingsectors.Theorganizedretailmarketisgrowingat35percentannuallywhilegrowthofunorganizedretailsecto

rispeggedat6percent.TheRetailBusinessinIndiaiscurrentlyatthepointofinflection.Asof2008,rapidchangewithinvestmentstothetuneofUS$25billionwerebeingplannedbyseveralIndianandmultinationalcompaniesinthenext5years.ItisahugeindustryintermsofsizeandaccordingtoIndiaBrandEquityFoundation(IBEF),itisvaluedataboutUS$395.96billion.Organisedretailisexpectedtogarnerabout16-18percentofthetotalretailmarket(US$65-75billion)inthenext5years.IndiahastoppedtheA.T.KearneysannualGlobalRetailDevelopmentIndex(GRDI)forthethirdconsecutiveyear,maintainingitspositionasthemostattractivemarketforretailinvestment.TheIndianeconomyhasregisteredagrowthof8%for2007.Thepredictionsfor2008is7.9%.Theenormousgrowthoftheretailindustryhascreatedahugedemandforrealestate.Propertydevelopersarecreatin

gretailrealestateatanaggressivepaceandby2010,300mallsareestimatedtobeoperationalinthecountry.Growthafter2011Before2011,Indiahadpreventedinnovationandorganizedcompetitioninitsconsumerretailindustry.SeveralstudiesclaimthatthelackofinfrastructureandcompetitiveretailindustryisakeycauseofIndiaspersistentlyhighinflation.Furthermore,becauseofunorganizedretail,inanationwheremalnutritionremainsaseriousproblem,foodwasteisrife.Wellover30%offoodstaplesandperishablegoodsproducedinIndiaspoilsbecausepoorinfrastructureandsmallretailoutletspreventhygienicstorageandmovementofthegoodsfromthefarmertotheconsumer.Onereportestimatesthe2011Indianretailmarketasgeneratingsalesofabout$470billionayear,ofwhichaminiscule$27billioncomesfromorganizedretai

lsuchassupermarkets,chainstoreswithcentralizedoperationsandshopsinmalls.Theopeningofretailindustrytofreemarketcompetition,someclaimwillenablerapidgrowthinretailsectorofIndianeconomy.OthersbelievethegrowthofIndianretailindustrywilltaketime,withorganizedretailpossiblyneedingadecadetogrowtoa25%share.A25%marketshare,giventheexpectedgrowthofIndianretailindustrythrough2021,isestimatedtobeover$250billionayear:arevenueequaltothe2009revenuesharefromJapanfortheworlds250largestretailers.TheEconomistforecaststhatIndianretailwillnearlydoubleineconomicvalue,expandingbyabout$400billionby2020.Theprojectedincreasealoneisequiva


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lenttothecurrentretailmarketsizeofFrance.In2011,foodaccountedfor70%ofindianretail,butwasunder-representedbyorganizedretail.A.T.KearneyestimatesIndiasorganizedretailhada31%shareinclothingandapparel,whilethehomesuppliesretailwasgrowingbetween20%to30%peryear.ThesedatacorrespondtoretailprospectspriortoNovemberannouncementoftheretailreform.IndianRetailMarketIndianmarkethashighcomplexitiesintermsofawidegeographicspreadanddistinctconsumerpreferencesvaryingbyeachregionnecessitatinganeedforlocalizationevenwithinthegeographiczones.Indiahashighestnumberofoutletsperperson(7perthousand)Indianretailspacepercapitaat2sqft(0.19m2)/personislowestintheworldIndianretaildensityof6percentishighestintheworld.1.8millionhouseholdsinIndiahaveanannualincomeofover45lakh(US$91,260).Delvingfurtherintoconsumerbuyinghabits,purchasedecisionscanbeseparatedintotwocategories:status-orientedandindulgence-oriented.CTVs/LCDs,refrigerators,washingmachines,dishwashers,microwaveovensandDVDplayersfallinthestatuscategory.Indulgence-orientedproductsincludeplasmaTVs,state-of-the-arthometheatresystems,iPods,high-enddigitalcameras,camcorders,andgamingconsoles.Consumersinthestatuscategorybuybecausetheyneedtomaintainapositionintheirsocialgroup.Indulgence-orientedbuyinghappenswiththosewhowanttoenjoylifebetterwithproductsthatmeettheirrequirements.Whenitcomestothefestivalshoppingseason,itisprimarilythestatus-orientedsegmentthatcontributeslargelytotheretailerscashregister.

WhileIndiapresentsalargemarketopportunitygiventhenumberandincreasingpurchasingpowerofconsumers,therearesignificantchallengesaswellgiventhatover90%oftradeisconductedthroughindependentlocalstores.Challengesinclude:Geographicallydispersedpopulation,smallticketsizes,complexdistributionnetwork,littleuseofITsystems,limitationsofmassmediaandexistenceofcounterfeitgoods.MajorIndianRetailersIndianapparelretailersareincreasingtheirbrandpresenceoverseas,particularlyindevelopedmarkets.WhilemosthaveidentifiedagapincountriesinWestAsiaandAfrica,somemajorsarealsolookingattheUSandEurope.ArvindBrands,MaduraGarments,SpykarLifestyleandRoyalClassicPoloarebusychalkingoutforeignexpansionplansthroughthedistributionrouteandstandalonestoresaswell.Anotherdenimwearbrand,Spykar,whichisnowmovingtowardsbecominga

casualwearlifestylebrand,haslauncheditsstoreinMelbournerecently.ItplanstoopenthreestoresinLondonby2008-end.Thelow-intensityentryofthediversifiedMahindraGroupintoretailisuniquebecauseitplanstofocusonlifestyleproducts.TheMahindraGroupisthefourthlargestIndianbusinessgrouptoenterthebusinessofretailafterRelianceIndustriesLtd,theAdityaBirlaGroup,andBhartiEnterprisesLtd.Theotherthreegroupsarefocusingeitheronperishablesandgroceries,orarangeofproducts,orboth. REIAGROLTDRetail:6TENand6TENkiranastores FutureGroups-Formats:BigBazaar,FoodBazaar,Pantaloons,Central,FashionSttion,BrandFactory,Depot,aLL,E-Zoneetc. RaymondLtd.:Textiles,TheRaymondShop,ParkAvenue,ParkAvenueWoman,Parx,Colourplus,NeckTies&More,Shirts&Moreetc.

Fabindia:Textiles,Homefurnishings,handloomapparel,jewellery RP-SanjivGoenkaGroupRetail-Formats:SpencersHyper,SpencersDaily,Music,AuBonPain(Internaionalbakerycafeteria),BeverlyHillsPoloClub TheTataGroup-Formats:Westside,StarIndiaBazaar,Steeljunction,Landmark,TtanIndustrieswithWorldofTitansshowrooms,Tanishqoutlets,Croma. RelianceRetail-Formats:RelianceMART,RelianceSUPER,RelianceFRESH,ReliancFootprint,RelianceLiving,RelianceDigital,RelianceJewellery,RelianceTrends,RelianceAutozone,iStore RelianceADAGRetail-Format:RelianceWorld KRahejaCorpGroup-Formats:ShoppersStop,Crossword,HyperCity,InorbitMall


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Nilgiris-Formats:Nilgirissupermarketchain Marks&Spencer:Clothing,lifestyleproducts,etc. LifestyleInternational-Lifestyle,HomeCentre,Max,FunCityandInternationalFranchisebrandstores. PyramidRetail-Formats:PyramidMegastore,TruMart NextretailIndiaLtd(ConsumerElectronics VivekLimitedRetailFormats:Viveks,Jainsons,ViveksServiceCentre,ViveksSfeDepositLockers PGCRetail-T-MartIndia,Switcher,RespectIndia,GrandIndiaBazaar,etc., Subhiksha-Formats:Subhikshasupermarketpharmacyandtelecomdiscountchain. Trinethra-Formats:FabmallsupermarketchainandFabcityhypermarketchain VishalRetailGroup-Formats:VishalMegaMart BPCL-Formats:In&Out GermanMetroCash&Carry ShopriteHoldings-Formats:ShopriteHyper Paritalastoresbazar:honeyshinestores AdityaBirlaGroupMoreOutlets Kapas-Cottongarmentoutlets NmartRetailswith71operatingStorestillnowandtotal153StoresinIndiaad1toopeninDubaiShortly.(Expectedtobe150bytheendofAug-2012)(www.nmart.co.in)EntryofMNCTheworldslargestretailerbysales,Wal-MartStoresIncandSunilMittalsBhartiEnterpriseshaveenteredintoajointventureagreementandtheyareplanningt

oopen10to15cash-and-carryfacilitiesoversevenyears.Thefirstofthestores,whichwillsellgroceries,consumerappliancesandfruitsandvegetablestoretailersandsmallbusinesses,isslatedtoopeninnorthIndiabytheendof2008.Carrefour,theworldssecondlargestretailerbysales,isplanningtosetuptwobusinessentitiesinthecountryoneforitscash-and-carrybusinessandtheotheramasterfranchiseewhichwilllenditsbanner,technicalservicesandknowhowtoanIndiancompanyfordirect-to-consumerretail.Theworldsfifthlargestretailerbysales,CostcoWholesaleCorp(Costco)knownforitswarehouseclubmodelisalsointerestedincomingtoIndiaandwaitingfortherightopportunity.Oppositiontotheretailersplanshavearguedthatlivelihoodsofsmallscaleandruralvendorswouldbethreatened.However,studieshavefoundthatonlyalimi

tednumberofsmallvendorswillbeaffectedandthatthebenefitsofmarketexpansionfaroutweightheimpactofthenewstores.TescoPlc.,planstosetupshopinIndiawithawholesalecash-and-carrybusinessandwillhelpIndianconglomerateTatagrouptogrowitshypermarketbusinessChallengesAMcKinseystudyclaimsretailproductivityinIndiaisverylowcomparedtointernationalpeermeasures.Forexample,thelaborproductivityinIndianretailwasjust6%ofthelaborproductivityinUnitedStatesin2010.Indiaslaborproductivityinfoodretailingisabout5%comparedtoBrazils14%;whileIndiaslaborproductivityinnon-foodretailingisabout8%comparedtoPolands25%.TotalretailemploymentinIndia,bothorganizedandunorganized,accountforabout6%ofIndianlaborworkforcecurrentlymostofwhichisunorganized.ThisaboutathirdoflevelsinUnitedStatesandEurope;andabouthalfoflevelsin

otheremergingeconomies.AcompleteexpansionofretailsectortolevelsandproductivitysimilartootheremergingeconomiesanddevelopedeconomiessuchastheUnitedStateswouldcreateover50millionjobsinIndia.Traininganddevelopmentoflaborandmanagementforhigherretailproductivityisexpectedtobeachallenge.Tobecomeatrulyflourishingindustry,retailinginIndianeedstocrossthefollowinghurdles: Automaticapprovalisnotallowedforforeigninvestmentinretail. Regulationsrestrictingrealestatepurchases,andcumbersomelocallaws. Taxation,whichfavourssmallretailbusinesses.


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AbsenceofdevelopedsupplychainandintegratedITmanagement. Lackoftrainedworkforce. Lowskilllevelforretailingmanagement. LackofRetailingCoursesandstudyoptions Intrinsiccomplexityofretailingrapidpricechanges,constantthreatofprotobsolescenceandlowmargins.InNovember2011,theIndiangovernmentannouncedrelaxationofsomerulesandtheopeningofretailmarkettocompetition.IndianRetailReformUntil2011,Indiancentralgovernmentdeniedforeigndirectinvestment(FDI)inmulti-brandIndianretail,forbiddingforeigngroupsfromanyownershipinsupermarkets,conveniencestoresoranyretailoutlets,tosellmultipleproductsfromdifferentbrandsdirectlytoIndianconsumers.ThegovernmentofManmohanSingh,primeminister,announcedon24November2011thefollowing: Indiawillallowforeigngroupstoownupto51percentinmulti-brandretailassupermarketsareknowninIndia,inthemostradicalpro-liberalisationreformpassedbyanIndiancabinetinyears; singlebrandretailers,suchasAppleandIkea,canown100percentoftheirInianstores,upfromthepreviouscapof51percent; bothmulti-brandandsinglebrandstoresinIndiawillhavetosourcenearlyahirdoftheirgoodsfromsmallandmedium-sizedIndiansuppliers; allmulti-brandandsinglebrandstoresinIndiamustconfinetheiroperationso53-oddcitieswithapopulationoveronemillion,outofsome7935townsandc

itiesinIndia.Itisexpectedthatthesestoreswillnowhavefullaccesstoover200millionurbanconsumersinIndia; multi-brandretailersmusthaveaminimuminvestmentofUS$100millionwithateasthalfoftheamountinvestedinbackendinfrastructure,includingcoldchains,refrigeration,transportation,packing,sortingandprocessingtoconsiderablyreducethepostharvestlossesandbringremunerativepricestofarmers; theopeningofretailcompetitionwillbewithinIndiasfederalstructureofgrnment.Inotherwords,thepolicyisanenablinglegalframeworkforIndia.ThestatesofIndiahavetheprerogativetoacceptitandimplementit,ortheycandecidetonotimplementitiftheysochoose.Actualimplementationofpolicywillbewithintheparametersofstatelawsandregulations.TheopeningofretailindustrytoglobalcompetitionisexpectedtospuraretailrushtoIndia.Ithasthepotentialtotransformnotonlytheretailinglandsc

apebutalsothenationsailinginfrastructure.AWallStreetJournalarticleclaimsthatfreshinvestmentsinIndianorganizedretailwillgenerate10millionnewjobsbetween2012-2014,andaboutfivetosixmillionoftheminlogisticsalone;eventhoughtheretailmarketisbeingopenedtojust53citiesoutofabout8000townsandcitiesinIndia.Itisexpectedtohelptamestubbornlyhighinflationbutislikelytobevehementlyopposedbymillionsofsmallretailers,whoseelargeforeignchainsasathreat.Theneedtocontrolfoodpriceinflationaveragingdouble-digitrisesoverseveralyearspromptedthegovernmenttoopenthesector,analystsclaim.HithertoIndiasfoodsupplieshavebeencontrolledbytensofmillionsofmiddlemen(lessthan5%ofIndianpopulation).Tradersaddhugemark-upstofarmprices,whileofferinglittlebywayoftechnicalsupporttohelpfarmersboosttheirproductivity,packagingtechnology,pushingupretailpricessignificantly.Analysts

saidallowinginbigforeignretailerswouldprovideanimpetusforthemtosetupmodernsupplychains,withrefrigeratedvans,coldstorageandmoreefficientlogistics.Ithinkforeignchainscanalsobringinhumongouslogisticalbenefitsandcapital,ChandrajitBanerjee,director-general,ConfederationofIndianIndustry,toldReuters.Thebiggestbeneficiarywouldbethesmallfarmerswhowillbeabletoimprovetheirproductivitybysellingdirectlytolargeorganisedplayers,MrBanerjeesaid.IndianretailreformsonholdAccordingtoBloomberg,on3December2011,theChiefMinisteroftheIndianstateofWestBengal,MamataBanerjee,whoisagainstthepolicyandwhoseTrinamoo


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lCongressbrings19votestotherulingCongressparty-ledcoalition,claimedthatIndiasgovernmentmayputtheFDIretailreformsonholduntilitreachesconsensuswithintherulingcoalition.Reutersreportsthatthisriskedapossibledilutionofthepolicyratherthanachangeofheart.IndiaTodayclaimedthattheresistancetoIndianretailreformsisprimarilybecauseithasbeenbadlysold,eventhoughitcanhelpfixtheexploitationofIndianfarmersbythedecades-oldarhtiyaandmandimonopolysystem.IndiaTodayclaisthepolicyisgoodforthesmallIndianfarmerandtheIndianconsumer.PratapMehta,presidentoftheCentreforPolicyResearch,claimedanyU-turnorpostponementofretailreformswillcauseanimmenselossoffacetotheCongress-ledcentralgovernmentofManmohanSingh.Themom-and-popfarmersofIndiasupportthesereforms.TheconsumersofIndiawantthereforms.Thegovernmenthasalreadyannoyedthosewhoopposechangeandinnovationinretail.Byputtingretailreformsonhold,thegovernmentwilladditionallyalienatemuchlargersegmentofIndiaspopulationsupportingFDI.Sotheywillnowhavetheworstofbothworlds,claimsMehta.DeepakParekh,AshokGangulyandothereconomicpolicyleadersofIndia,on4December2011,calledplacinginvestmentandinnovationinretailonholdforthesakeofvestedinterestsasunfairanddetrimentaltovastmajorityinIndia.Theyurgedfarmers,consumersandthecommonpeopletoraisetheirvoiceagainstthisfalsedramaofapprehensionagainstinvestmentandmodernisingtradeinorganisedretailing.TheycalleduponIndianstocomeoutandstronglysupportprogressivemeasuresandreformswiththesamespiritandgustowithwhichwetakethelibertiestocriticizepoliciesorissueswedonotappreciate.

Severalnewspapersclaimedon6December2011thatIndiaparliamentisexpectedtoshelveretailreformswhiletherulingCongresspartyseeksconsensusfromtheoppositionandtheCongresspartysowncoalitionpartners.Suspensionofretailreformson7December2011wouldbe,thereportsclaimed,anembarrassingdefeatfortheIndiangovernment,suggestingitisweakandineffectiveinimplementingitsideas.AnandSharma,IndiasCommerceandIndustryMinister,afterameetingofallpoliticalpartieson7December2011said,Thedecisiontoallowforeigndirectinvestmentinretailissuspendedtillconsensusisreachedwithallstakeholders.SocialImpactandControversywithRetailReformsTheNovember2011retailreformsinIndiahavesparkedintenseactivism,bothinoppositionandinsupportofthereforms.ControversyoverIndianretailreforms

AhorticulturalproduceretailmarketinKolkata,India;producelossintheseretailformatsisveryhighforperishablesCriticsoftheIndianretailreformsannouncementaremakingoneormoreofthefollowingpoints: Independentstoreswillclose,leadingtomassivejoblosses.WalmartemploysvryfewpeopleintheUnitedStates.IfallowedtoexpandinIndiaasmuchasWalmarthasexpandedintheUnitedStates,fewthousandjobsmaybecreatedbutmillionswillbelost. Walmartwilllowerpricestodumpgoods,getcompetitionoutoftheway,becomeamonopoly,thenraiseprices.Wehaveseenthisinthecaseofthesoftdrinksindustry.PepsiandCokecameinandwipedoutallthedomesticbrands. Indiadoesntneedforeignretailers,sincehomegrowncompaniesandtraditionalrketsmaybeabletodothejob.

WorkwillbedonebyIndians,profitswillgotoforeigners. RememberEastIndiaCompany.ItenteredIndiaasatraderandthentookoverpoitically. TherewillbesterilehomogeneityandIndiancitieswilllooklikecitiesanywhreelse. Thegovernmenthasntbuiltconsensus.Supportersclaimnoneoftheseobjectionshasmerit.Theyclaim: Organizedretailwillneedworkers.Walmartemploys1.4millionpeopleinUniteStatesalone.WithUnitedStatespopulationofabout300million,andIndiaspopulationofabout1200million,ifWalmart-likeretailcompaniesweretoexpandi


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nIndiaasmuchastheirpresenceintheUnitedStates,andthestaffinglevelinIndianstoreskeptatthesamelevelasintheUnitedStatesstores,Walmartalonewouldemploy5.6millionIndiancitizens.Walmarthasa6.5%marketshareofthetotalUnitedStatesretail.Adjustedforthismarketshare,theexpectedjobsinfutureIndianorganizedretailwouldtotalover85million.Inaddition,millionsofadditionaljobswillbecreatedduringthebuildingofandthemaintenanceofretailstores,roads,coldstoragecenters,softwareindustry,electroniccashregistersandotherretailsupportingorganizations.Insteadofjoblosses,retailreformsarelikelytobemassiveboosttoIndianjobavailability. KPMGoneoftheworldslargestauditcompaniesfindsthatinChina,theemtinbothretailandwholesaletradeincreasedfrom4%in1992toabout7%in2001,postChinaopeningitsretailtoforeignanddomesticinnovationandcompetition.Inabsoluteterms,Chinaexperiencedthecreationof26millionnewjobswithin9years,postChinaannouncingFDIretailreforms.Additionally,contrarytosomeconcernsinChina,postretailreforms,thenumberoftraditionalsmallretailersalsogrewby30%over5years. Indianeedstrillionsofdollartobuilditsinfrastructure,hospitals,housingandschoolsforitsgrowingpopulation.Indianeconomyissmall,withlimitedsurpluscapital.Indiangovernmentisalreadyoperatingonbudgetdeficits.ItissimplynotpossibleforIndianinvestorsorIndiangovernmenttofundthisexpansion,jobcreationandgrowthattherateIndianeeds.GlobalinvestmentcapitalthroughFDIisnecessary.Beyondcapital,Indianretailindustryneedsknowledgeandglobalintegration.Globalretailleaders,someofwhicharepartlyownedbypeopleofIndianorigin,canbringthisknowledge.Globalintegrationcanpot

entiallyopenexportmarketsforIndianfarmersandproducers.Walmart,forexample,expectstosourceandexportsome$1billionworthofgoodsfromIndiaeveryyear,sinceitcameintoIndianwholesaleretailmarket. Walmart,Carrefour,Tesco,Target,Metro,Cooparesomeofover350globalretalcompanieswithannualsalesover$1billion.Theseretailcompanieshaveoperatedforover30yearsinnumerouscountries.Theyhavenotbecomemonopolies.CompetitionbetweenWalmart-likeretailershaskeptfoodpricesincheck.CanadacreditstheirverylowinflationratestoWalmart-effect.Anti-trustlawsandstateregulations,suchasthoseinIndianlegalcode,havepreventedfoodmonopoliesfromforminganywhereintheworld.Priceinflationinthesecountrieshasbeen5to10timeslowerthanpriceinflationinIndia.ThecurrentconsumerpriceinflationinEuropeandtheUnitedStatesislessthan2%,comparedtoIndiasdoubledigitinflation.

ThePepsiandCokeexampleismeaninglessinthecontextofIndianbeveragemaret.Morecompetitionislackingbecauseoflimiteddemand.Indianconsumerhaslimitedinterestinsoftdrinks.Softdrinksrepresentlessthan5%ofIndianbeveragemarket.Indianconsumerprefersmilk-based,teaandcoffeeandtheseaccountfor90%ofIndianbeveragemarket.Inthesemarkets,CocaColaandPepsihaveplentyofcompetition.ThenextmostimportantmarketinIndiaisbottledwater,thatoutsellscombinedsoftdrinksalesofthePepsiandCocaCola.Bottledwater,milk,coffeeandteamarketinIndiaarebigmarkets,andhaveplentyofdomesticbrands,EuropeanbrandslikeNestle,aswellasPepsiandCocaCola.Organizedretailtoowillhavenumerousbrandsandstrongcompetition. Comparing21stcenturyto18thcenturyisinappropriate.Conditionstodayarentsameasinthe18thcentury.Indiawasntademocracythen,itistoday.Globalawarenessandnewsmediawerenotthesamein18thcenturyastoday.ConsiderCh

inatoday.Ithasover57millionsquarefeetofretailspaceownedbyforeigners,employingmillionsofChinesecitizens.Yet,Chinahasntbecomeavassalofimperialists.Itenjoysrespectfromallglobalpowers.OtherAsiancountrieslikeMalaysia,Taiwan,ThailandandIndonesiaseeforeignretailersascatalystsofnewtechnologyandpricereduction;andtheyhavebenefittedimmenselybywelcomingFDIinretail.Indiatoowillbenefitbyintegratingwiththeworld,ratherthanisolatingitself. With51%FDIlimitinmulti-brandretailers,nearlyhalfofanyprofitswillreaininIndia.Anyprofitswillbesubjecttotaxes,andsuchtaxeswillreduceIndiangovernmentbudgetdeficit.Manyyearsago,Chinaadoptedtheretailreform


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policyIndiahasannounced;ChinaallowedFDIinitsretailsector.IthastakenFDI-financedretailersinChinabetween5to10yearstopostprofits,inlargepartbecauseofhugeinvestmentstheyhadtomakeinitially.LikeChina,itisunlikelyforeignretailerswillearnanyprofitsinIndiaforthefirst5to10years.Ultimately,retailcompaniesmustearnprofitswithhardworkandbycreatingvalue. StateshavearighttosaynotoretailFDIwithintheirjurisdiction.Stateshvetherighttoaddrestrictionstotheretailpolicyannouncedbeforetheyimplementthem.Thus,theycanplacelimitsonnumber,marketshare,style,diversity,homogeneityandotherfactorstosuittheirculturalpreferences.Finally,infuture,statescanalwaysintroduceregulationsandIndiacanchangethelawtoensurethebenefitsofretailreformsreachthepoorestandweakestsegmentsofIndiansociety,freeandfairretailcompetitiondoesindeedleadtosharplylowerinflationthancurrentlevels,smallfarmersgetbetterprices,jobscreatedbyorganizedretailpaywell,andhealthierfoodbecomesavailabletomorehouseholds. Inbuiltinefficienciesandwastageindistributionandstorageaccountforwhy,accordingtosomeestimates,asmuchas40%offoodproductiondoesntreachconsumers.FiftymillionchildreninIndiaaremalnourished.Foodoftenrotsatfarms,intransit,orinantiquatedstate-runwarehouses.Cost-consciousorganizedretailcompanieswillavoidwasteandloss,makingfoodavailabletotheweakestandpoorestsegmentofIndiansociety,whileincreasingtheincomeofsmallfarmers.Walmart,forexample,sinceitsarrivalinIndianwholesaleretailmarket,hassuccessfullyintroducedDirectFarmProjectatHaiderNagarnearMalerkotlain

Punjab,where110farmershavebeenconnectedwithBhartiWalmartforsourcingfreshvegetablesdirectly,therebyreducingwasteandbringingfresherproducetoIndianconsumers. Indiansmallshopsemployworkerswithoutpropercontracts,makingthemworkloghours.Manyunorganizedsmallshopsdependonchildlabour.Awell-regulatedretailsectorwillhelpcurtailsomeoftheseabuses. Organizedretailhasenabledawiderangeofcompaniestostartandflourishinothercountries.Forexample,intheUnitedStates,anorganizedretailernamedWholeFoodshasrapidlygrowntoannualrevenuesof$9billionbyworkingcloselywithfarmers,delightingcustomersandcaringaboutthecommunitiesithasstoresin. Theclaimsthatthereisnoconsensusarewithoutmerit.About10yearsago,whnoppositionformedthecentralgovernment,theyhadproposedretailreformsand

suggestedIndiaconsiderFDIinretail.Retailreformsdiscussionsarenotnew.Morerecently,retailreformsannouncedevolvedafteraprocessofintenseconsultationsandconsensusbuildinginitiative.In2010,theIndiangovernmentcirculatedadiscussionpaperonFDIretailreforms.OnJuly62011,anotherversionofthediscussionpaperwascirculatedbythecentralgovernmentofIndia.Commentsfromawidecross-sectionofIndiansocietyincludingfarmersassociations,industrybodies,consumerforums,academics,tradersassociations,investors,economistswereanalyzedindepthbeforethematterwasdiscussedbytheCommitteeofSecretaries.ByearlyAugust2011,theconsensusfromvarioussegmentsofIndiansocietywasoverwhelminginfavorofretailreforms.ThereformoutlinewaspresentedinIndiasRajyaSabhainAugust2011.Theannouncedreformsaretheresultofthisconsensusprocess.Thecurrentoppositionisnothelpingtheconsensusprocess,sinceconsensusisnotbuiltbythreatsanddisruption.Thosewhoop

posecurrentretailreformsshouldhelpbuildconsensuswithideasandproposals,iftheyhaveany.TheoppositionpartiescurrentlydisruptingtheIndianparliamentonretailreformshavenotofferedevenoneideaorasingleproposalonhowIndiacaneliminatefoodspoilage,reduceinflation,improvefoodsecurity,feedthepoor,improvetheincomesofsmallfarmers.OppositiontoretailreformsWithinaweekofretailreformannouncement,Indiangovernmenthasfacedapoliticalbacklashagainstitsdecisiontoallowcompetitionand51%ownershipofmulti-brandorganizedretailinIndia.DespitethefactthatSalmanKhurshid,Indiaslawminister,claimingthatmanyop


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positionparties,includingtheBharatiyaJanataParty,hadprivatelyencouragedthegovernmenttopushthroughtheretailreform,theintensecriticismnowtargetsCongress-ledcoalitiongovernment,anditsdecisiontopushthroughoneofthebiggesteconomicreformsinyearsforIndia.Oppositionpartiesclaimsupermarketchainsareill-advised,unilateralandunwelcome.Theoppositionclaimstheentryoforganizedretailerswouldleadtotheirdominancethatwoulddecimatelocalretailersandforcemillionsofpeopleoutofwork.MamataBanerjee,thechiefministerofWestBengalandtheleaderoftheTrinamoolCongress,announcedheroppositiontoretailreform,claimingSomepeoplemightsupportit,butIdonotsupportit.YouseeAmericaisAmericaandIndiaisIndia.Onehastoseewhatonescapacityis.OtherstateswhoseChiefMinistershaveeitherpersonallyannouncedoppositionorannouncedreluctancetoimplementtheretailreforms:TamilNadu,UttarPradesh,BiharandMadhyaPradesh.ChiefMinistersofmanystateshavenotmadeapersonalstatementinoppositionorsupportofIndianeedingretailreforms.Gujarat,Kerala,KarnatakaandRajasthanareexamplesofthesestates.Bothsideshavemadeconflictingclaimsaboutthepositionofchiefministersfromthesestates.AWallStreetJournalarticlereportsthatinUttarPradesh,UmaBharti,aseniorleaderoftheoppositionBharatiyaJanataParty(BJP),threatenedtosetfiretothefirstWal-Martstorewheneveritopens;withhercolleagueSushmaSwarajbusytweetingupastormofmisinformationabouthowWal-MartallegedlyruinedtheU.S.economy.

On1December2011,anIndia-widebandh(closeallbusinessinprotest)wascalledbypoliticalpartiesopposingtheretailreform.Whilemanyorganizationsresponded,thereachoftheprotestwasmixed.TheTimesofIndia,anationalnewspaperofIndia,claimedpeopleappeareddividedoverthebandhcallandinternalrivalryamongtradeassociationsledtoamixedresponse,leavingmanystoresopenday-longandothersopeningforbusinessasusualinthesecondhalfoftheday.EvenPurtiGroup,anetworkofstoresownedandoperatedbyNitinGadkariwereopenforbusiness,ignoringthecallforbandh.GadkariisthepresidentofBJP,thekeypartycurrentlyorganizingoppositiontoretailreform.TheHindu,anotherwidelycirculatednewspaperinIndia,claimedtheoppositionscallforanationwideshutdownon1December2011,inprotestofretailreformreceivedamixedresponse.Somestateshadstrongsupport,whilemostdidnot.Eveninstateswhereoppositionpoliticalpartiesareinpower,manyignoredthec

allfortheshutdown.InGujarat,Bihar,Delhi,AndhraPradesh,Haryana,PunjabandAssamthecallevokedapartialresponse.Whileanumberofwholesalemarketsobservedtheshutdown,thenewspaperclaimedamajorityofkiranastoresandneighborhoodsmallshopsforwhomapparentlythetradebandhhadbeencalledremainedopen,ignoringtheshutdowncall.Conflictingclaimsweremadebytheorganizersofthenationwideshutdown.Contrarytoeyewitnessreports,oneTraderunionssecretarygeneralclaimedtradersacrossthecountryparticipatedwholeheartedlyinthestrike.ThepoliticalpartiesopposingtheretailreformsphysicallydisruptedandforcedIndiasparliamenttoadjournagainonFriday2December2011.TheIndiangovernmentrefusedtocavein,initsattempttoconvincethroughdialoguethatretailreformsarenecessarytoprotectthefarmersandconsumers.IndianparliamenthasbeendysfunctionalfortheentireweekofNovember282011overtheoppositio

ntoretailreforms.SupportforretailreformsInapan-Indiansurveyconductedovertheweekendof3December2011,overwhelmingmajorityofconsumersandfarmersinandaroundtenmajorcitiesacrossthecountrysupporttheretailreforms.Over90percentofconsumerssaidFDIinretailwillbringdownpricesandofferawiderchoiceofgoods.Nearly78percentoffarmerssaidtheywillgetbetterpricesfortheirproducefrommulti-formatstores.Over75percentofthetradersclaimedtheirmarketingresourceswillcontinuetobeneededtopushsalesthroughmultiplechannels,buttheymayhavetoacceptlowermarginsforgreatervolumes.


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FarmergroupsVariousfarmerassociationsinIndiahaveannouncedtheirsupportfortheretailreforms.Forexample: ShriramGadhveofAllIndiaVegetableGrowersAssociation(AIVGA)claimshisoranizationsupportsretailreform.Heclaimedthatcurrently,itisthemiddlemencommissionagentswhobenefitatthecostoffarmers.Heurgedthattheretailreformmustfocusonruralareasandthatfarmersreceivebenefits.Gadhveclaimed,Abettercoldstoragewouldhelpsincethiscouldhelppreventtheexistinglossof34%offruitsandvegetablesduetoinefficientsystemsinplace.AIVGAoperatesinninestatesincludingMaharashtra,AndhraPradesh,WestBengal,Bihar,Chattisgarh,PunjabandHaryanawith2,200farmeroutfitsasitsmembers. BharatKrishakSamaj,afarmerassociationwithmorethan75,000memberssaysisupportsretailreform.AjayVirJakhar,thechairmanofBharatKrishakSamaj,claimedamonopolyexistsbetweentheprivateguildsofmiddlemen,commissionagentsatthesabzimandis(Indiaswholesalemarketsforvegetablesandfarmproduce)andthesmallshopkeepersintheunorganizedretailmarket.Giventheperishablenatureoffoodlikefruitandvegetables,withouttheoptionofsafeandreliablecoldstorage,thefarmeriscompelledtosellhiscropatwhateverpricehecanget.Hecannotwaitforabetterpriceandisthusexploitedbythecurrentmonopolyofmiddlemen.Jakharaskedthatthegovernmentmakeitmandatoryfororganizedretailerstobuy75%oftheirproducedirectlyfromfarmers,bypassingthemiddlemenmonopolyandIndiassabzimandiauctionsystem. ConsortiumofIndianFarmersAssociations(CIFA)announceditssupportforretalreform.ChengalReddy,secretarygeneralofCIFAclaimedretailreformcouldd

olotsforIndianfarmers.Reddycommented,Indiahas600millionfarmers,1,200millionconsumersand5milliontraders.Ifailtounderstandwhypoliticalpartiesaretakingananti-farmerstandandworriedabouthalfamillionbrokersandsmallshopkeepers.CIFAmainlyoperatesinAndhraPradesh,KarnatakaandTamilNadu;buthasagrowingmembersfromrestofIndia,includingShetkariSanghatanainMaharashtra,RajasthanKisanUnionandHimachalFarmerOrganisations. PrakashThakur,thechairmanofthePeopleforEnvironmentHorticulture&LivelhoodofHimachalPradesh,announcinghissupportforretailreformsclaimedFDIisexpectedtorolloutproducestoragecentersthatwillincreasemarketaccess,reducethenumberofmiddlemenandenhancereturnstofarmers.Highlyperishablefruitslikecherry,apricot,peachesandplumshaveahugedemandbutareunabletotapthemarketfullybecauseoflackofcoldstorageandtransportinfrastructure.Saleswillboostwiththeopeningupofretail.EventhoughIndiaist

hesecond-largestproduceroffruitsandvegetablesintheworld,itsstorageinfrastructureisgrosslyinadequate,claimedThakur. SharadJoshi,founderofShetkariSangathana(farmersassociation),hasannouncdhissupportforretailreforms.JoshiclaimsFDIwillhelpthefarmsectorimprovecriticalinfrastructureandintegratefarmer-consumerrelationship.Today,theexistingretailhasnotbeenabletosupplyfreshvegetablestotheconsumersbecausetheyhavenotinvestedinthebackwardintegration.Whenthefarmersproducereachestheendconsumerdirectly,thefarmerswillnaturallybebenefited.JoshifeelsretailreformisjustafirststepofneededagriculturalreformsinIndia,andthatthegovernmentshouldpursueadditionalreforms.Suryamurthy,inanarticleinTheTelegraph,claimsfarmergroupsacrossIndiadonotsupportstatusquoandseekretailreforms,becausewiththecurrentretailsystemthefarmerisbeingexploited.Forexample,thearticleclaims:

Indianfarmersgetonlyonethirdofthepriceconsumerspayforfoodstaples,herestistakenascommissionsandmarkupsbymiddlemenandshopkeepers Forperishablehorticultureproduce,averagepricefarmersreceiveisbarely12to15%ofthefinalpriceconsumerpays IndianpotatofarmersselltheircropforRs.2to3akilogram,whiletheIndinconsumerbuysthesamepotatoforRs.12to20akilogram.EconomistsandentrepreneursManybusinessgroupsinIndiaarewelcomingthetransformationofalong-protectedsectorthathasleftIndianshoppersbereftofthescaleandvarietyoftheircounterpartsinmoredevelopedmarkets.


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B.Muthuraman,thepresidentoftheConfederationofIndianIndustry,claimedtheretailreformwouldopenenormousopportunitiesandleadtomuch-neededinvestmentincoldchain,warehousingandcontractfarming.Organizedretailerswillreducewastebyimprovinglogistics,creatingcoldstoragetopreventfoodspoilage,improvehygieneandproductsafety,reducecounterfeittradeandtaxevasiononexpensiveitempurchases,andcreatedependablesupplychainsforsecuresupplyoffoodstaples,fruitsandvegetables.TheywillincreasechoiceandreduceIndiasrampantinflationbyreducingwaste,spoilageandcuttingoutmiddlemen.Freshinvestmentinorganizedretail,thesupportersofretailreformclaimwillgenerate10millionnewjobsby2014,aboutfivetosixmillionoftheminlogisticsalone.OrganizedretailwillofferthesmallIndianfarmermorecompetingvenuestosellhisorherproducts,andincreaseincomefromlessspoilageandwaste.AFoodandAgriculturalOrganizationreportclaimsthatcurrently,inIndia,thesmallfarmerfacessignificantlossespost-harvestatthefarmandbecauseofpoorroads,inadequatestoragetechnologies,inefficientsupplychainsandfarmersinabilitytobringtheproduceintoretailmarketsdominatedbysmallshopkeepers.TheseexpertsclaimIndiaspost-harvestlossestoexceed25%,onaverage,everyyearforeachfarmer.Unlikethecurrentmonopolyofmiddlemenbuyer,retailreformsofferfarmersaccesstomorebuyersfromorganizedretail.Morebuyerswillcompeteforfarmersproduceleadingtobettersupportforfarmersandtobetterbids.Withlessspoilageofstaplesandagriculturalproduce,globalretailcompaniescanfindandprovideadditionalmarketstoIndianfarmers.Walmart,sinceitsarrivalinIndias

wholesaleretailmarket,alreadysourcesandexportsabout$1billionworthofIndiangoodsforitsglobalcustomers.NotonlydotheselossesreducefoodsecurityinIndia,thestudyclaimsthatpoorfarmersandotherslooseincomebecauseofthewasteandinefficientretail.OverUS$50billionofadditionalincomecanbecomeavailabletoIndianfarmersbypreventingpost-harvestfarmlosses,improvingtransport,properstorageandretail.OrganizedretailisalsoexpectedtoinitiateinfrastructuredevelopmentcreatingmillionsofruralandurbanjobsforIndiasgrowingpopulation.Onestudyclaimsthatifthesepost-harvestfoodstaplelossescouldbeeliminatedwithbetterinfrastructureandretailnetworkinIndia,enoughfoodwouldbesavedeveryyeartofeed70to100millionpeopleovertheyear.Supportersofretailreform,TheEconomistclaims,sayitwillincreasecompetitionandqualitywhilereducingpriceshelpingtoreduceIndiasrampantinflation

thatisclosetothedoubledigits.Thesesupportersclaimthatunorganizedsmallshopkeeperswillcontinuetoexistalongsidelargeorganizedsupermarkets,becauseformanyIndianstheywillremainthemostaccessibleandmostconvenientplacetoshop.ChiefMinistersofIndianstatesSupportersofretailreformwhohavevoicedtheneedtopromoteorganizedretailincludeChiefMinistersofseveralstatesofIndia,severalbelongingtopoliticalpartiesthathavenoaffiliationwithCongress-ledcentralgovernmentofIndia.ThelistincludestheChiefMinistersofMaharashtra,AndhraPradesh,TamilNaduandGujarat.Inareportsubmittedearlierin2011,theseChiefMinistersurgedthePrimeMinistertoprioritizereformstohelppromoteorganizedretail,shortentheretailpathfromfarmtoconsumer,alloworganizedretailtobuydirectfromfarmersatremunerativeproduceprices,andreducefarmtoretailcosts

.Similarly,theChiefMinisterofDelhihascomeoutinsupportoftheretailreform,ashavetheChiefMinistersofthetwofarmingstatesofHaryanaandPunjabinnorthIndia.TheChiefMinistersofHaryanaandPunjabclaimthattheannouncedretailreformswillimmenselybenefitfarmersintheirstates.TheChiefMinisterofthestateofMaharashtrathestatewiththehighestGDPinIndiaandhometoitsfinancialcapitalMumbaihasalsowelcomedtheretailreform.TarunGogoi,theChiefMinisterofAssam,aneasternstateinIndia,announcinghissupporttotheretailreform,claimedthiswillgoalongwayinbringingaboutaseachangeinruraleconomy.Thedecisionwillboostagricultureandallied


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sectors,manufacturing,logistics,integratedcoldchains,refrigeratedtransportationandfoodprocessingfacilitiesinabigway.CriticisingtheBJP-organizedopposition,GogoiclaimedthatthesepartieswhohadjustafewyearsagodubbedopeningupretailasgoodforIndia,arenowsingingadifferenttune.CurrentsupermarketsExistingIndianretailfirmssuchasSpencers,FoodworldSupermarketsLtd,NilgirisandShopRitesupportretailreformandconsiderinternationalcompetitionasablessingindisguise.Theyexpectaflurryofjointventureswithglobalmajorsforexpansioncapitalandopportunitytogainexpertiseinsupplychainmanagement.SpencersRetailwith200storesinIndia,andwithretailoffreshvegetablesandfruitsaccountingfor55percentofitsbusinessclaimsretailreformtobeawin-winsituation,astheyalreadyprocurethefarmproductsdirectlyfromthegrowerswithouttheinvolvementofmiddlemenortraders.Spencersclaimsthatthereisscopeforittoexpanditsfootprintintermsofstorelocationaswellasprocuringfarmproducts.Foodworld,whichoperatesover60stores,planstorampupitspresencetomorethan200locations.IthasalreadytiedupwithHongKong-basedDairyFarmInternational.WiththerelaxationininternationalinvestmentsinIndianretail,IndiasFoodworldexpectsitsglobalrelationshipwillonlygetstronger.Competitionandinvestmentinretailwillprovidemorebenefitstoconsumersthroughlowerprices,wideravailabilityandsignificantimprovementinsupplychainlogistics

ThreeAdvantagesofFDIinRetail-1.Moreinvestmentsintheendtoendsupplychain-FortheForeignMultiBrandretailers,enteringIndialaterwouldbeasignificantdisadvantageandtheywouldtryandintroducealotofinnovationshithertonotintroduced.Forone,theywouldinvestheavilyintoend-to-endsupplychainsincludingworldclasscoldstoragefacilities.2.Lowspillageandwastage-InIndia,thesupplychainisconsideredhighlyinneffientduetothehugewastageduringthetransportation.Theglobalworldclassretailerswouldintroducequalitystandardsthataresecondtononeandwouldleadtomorefarmproducereachingtheendconsumerinaconsumablecondition.Thiswouldimproveproductivityoftheentiresystem.3.Moreoptionsfortheconsumer-Theconsumerwouldgetcompellingoptionsfordoingtheirshoppingwhichwouldleadtoafulfillingconsumerexperience

ThreedisadvantagesofFDIinRetail-1.ExistenceofIndianbiggies-AlreadymultipleIndiancorporatesarewellentrenchedintotheIndianMarketwiththeirorganisedmultibrandretailofferings.UnderthissituationisanFDIinfluxtrulyrequired?Thatisoneofthebiggestquestionsthatisbeingasked.2.Littleincrementalvalue-ThecriticsofthemovesaythatIndiaasacountryrequiresdifferentfundamentalstosurviveanddelivervaluetotheconsumer.Thelastmiledeliveryofalotofgoodshappentotheconsumer shome-theretailergoestotheconsumerinIndiaandnottheotherwayround,thusfarinalotofcases.Hence,thecriticsclaimthatthereislittleincrementalvalueby


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implementingFDIinretailrules.3.WillPricesreduceforconsumers-Notatall-WilltherebeanetgainforconsumersintermsofPricesavings?Notatall.NoteventhebiggestsupportersofFDIinretailclaimthattheconsumerwillspendlessfromhis/herpocketduetothisFDIinretailinflux.Clearly,thereisalotmoretothisdebate,andbothsidesclaimtohavealotofpositives.Wherewillthepublicopinionsidewith?Whatwilltheaamaadmisay?Letusknow.

Thursday,20September2012ProsAndConsOfFDIInIndianRetail

TrinamoolCongressallowFDI(Retail)intheregionof51percent,dieselfiverupeesperliterandintheyearstojust6discountedcylinderdeadlinePMquitsinprotest(PdihafullstoryandEveryupdateto)request.Moststategovernments,particularlythenon-Congress-ruledstateinoppositiontoFDIinretail(Pdiha:theattitudeofstates).

Politicalpartiesandgovernmentsstanceontheissueofprofit-losscameontheground..Senaasheclosedthe20thofSeptembertotakepartinIndiaareproposedNDA.Partiesotherthanthestanceofthematter,51percentoftheretailmarket,foreigndirectinvestment(FDI),thegovernment sdecisiontoallowthecountryaretheadvantagesanddisadvantages?Wearetryingtoanswerthisquestion.

1.Benefitfarmers:farmersinthecountry sconditionisnothiddenfromanyone.Theirstateofmiseryinthelastfewyears,thousandsoffarmersadoptedthepathofsuicideinfarminglosses.PrimeMinisterManmohanSinghhasarguedthatFDIinretailwillbenefitfarmersdirectly.BrazilandArgentinaawarethatallowingFDIintheretailsector,theeconomicbenefitsthatwouldaccruetofarmershasincreasedby37percent.

2.Customerswillfindcheapthings:FDIpro-SouthAmericancountries-BrazilandArgentinaillustratethatitallowsthosecountriesafterFDIinretailpricesofnearlyallthingshavefallennearly18percent.

3.Willnotgroceries edge :sticklerforforeigninvestmentinretailmarketpunditsclaimthatorganizedretailoutletsinthecountry(likeBigBazaar,VMartandMore)Afterallowingthegrocerybusinessgrewby19percent.ExpertsalsoclaimthatBharti-Wal-Martownsnearly30thousandgrocerystoresbuygoods.Thereasonisthatthesegroceryownersgetcheapergoods.

4.Getridofmiddlemen:marketintermediariestakethemostadvantage.Neitherfarmersnoranyobjectthatproducesgoodsthefinalbuyer(customer)isofnou

seinit.Middlemenatveryaffordableratestocustomersrangingfromfarmers,theirproductssellattwiceorsometimesthreetimestheprice..

5.Villageswilldirectlybenefit:ProponentsofFDIisthatforeigncapitalwillcomefromahugeplusthatitwillforeigncapitalinruraldevelopment.SomeexpertsclaimthattheretailmarketinIndiatohitanyforeigninvestorwillinvestU.S.$100billion.Ofthisamount,50percentoftheU.S.$100billionto$50billionwillbespentonthoseplaceswhereyoubuygoodsfromcompanies.FDIinslide5furtherassessthepotentialdamage.


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6.Agriculture:PrimeMinisterManmohanSinghclaimsthatIndia sagriculturalsectorforFDI boon willbe.ButagriculturalexpertDrDevinderSharmasaidisnottrue.FederalgovernmentsupportintheU.S.becausethereareadvantagestothefarmer.In2008,theFarmBillintheU.S.forthenext5years,theagriculturalsectorwastheprovisionofU.S.$307billion.

7.Pricereduction:largeretailoutletstomarketgraduallymonopoly(Monopli)takeup.Afterthemonopolycompaniesthatselltheirproductsatexorbitantrates.OpposingFDIinAfricaandAsia,someanalystsclaimthattheopenmarketpriceofcommoditiesinsupermarketsthan20to30percentwerefound.

8.GovernmentsaidFDIwillsavegraintorotCompaniesproponentsofFDIintheretailmarkettoforeigncompaniesinvestingmillionstonnesscientificallymeasureswillsufficeforpreservation.ButopponentsofFDIintheretailsectorinthecountry,thelargestcompaniesoftheworldasksfarmerstograinstoragefacilitiesforpreservationare?Considerthefactthatthegovernmentstorage(storage)hasalreadygivenpermissiontoFDIintheregion.Butuntilnowtherehasbeennoforeigninvestmentinthesector.

9.ButagriculturalexpertDrDevinderSharmasaysthatthisassumptioniswrong.Butin2005itfellto4percentgain.So,wherefarmersaregaining.Thisissobecauseofthelargeretailstorescomewiththenewkindofmiddleman.SinceFDIQualityController,Standrdaijr,certificationagency,processorandpackagingconsultantwillcomeasnewintermediaries.

10.Employment:AccordingtoanestimateretaileconomyinIndiaofabout400billionUSdollars.It1.2croreretailtradersemploymenttoabout4crorepeople.Thefacttonotehereisthatthewall-martturnoverof420billiondollars.ButtheCompanyhasgivenemploymenttoonly21millionpeople.opponentsofforeigninvestmentinretailmarketthatifwall-martcompanylikediedsolittleofthepeopleareonbusinessasIndia,asthetotalretailmarket,theCompanyiswhatcanbeexpected.

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