FDI In Retail: It Looks Like A Win-Win Situation

Posted on September 28, 2012 in Society

By Neha Bhandarkar:

Sample this: A ten-year-old (Let us call him Raju!) was asked by his mother to get half a kg sugar and a packet of milk from the nearby grocery shop. Raju goes to the shop and for some reason, that day the prices of the regular milk packet have gone up by a few rupees. Raju was given the exact amount for the things that were to be bought. The grocery shop owner (let’s name him Mr. Lal) is quite known to Raju’s family. He tells the little boy to pay the remaining amount later, and hence Raju gets what his mother had asked for and gets back home.

If you imagine a similar situation where Raju is sent to a nearby Super Shoppe (say, a Reliance fresh), I don’t think I need to narrate you what is likely to happen at the end of the story!

Change comes with its set of inevitable consequences. Speaking of which all the hullabaloo that has come with the central government’s decision to allow Foreign Direct Investment in retail, whether or not the kirana shops will be shut down because of the entry of international bigwigs like Walmart, has got several arguments to it.

With liberalised trade policies being openly practised in our country, FDI will undoubtedly have an effect on the established unorganized retail sector. To elucidate, if we consider the conditions on the basis of which FDI will be allowed to launch their firms, one can actually see that there is no such threat that the kirana shops will face. Foreign retailers will be allowed to set up only in cities with a population of more than 1 million and only in states that want them. The retailers must make a minimum investment of $100 million and must source at least 30 percent of the goods from local, small industries.

One should not forget that the small scale retail shops (mom-and-pop store as they are popularly called) that are spread across in almost every nook and cranny of every available neighbourhood, allow their consumers to be a part of their business, in a way that there is a personal connection. There lies that genteel association with which you are welcomed and the baniya (owner) won’t really mind if you buy something off the list that you are carrying in your shopping bag (no you are still indebted, better pay when you visit next! ).

India is said to be a nation of shopkeepers. With almost every family from lower to upper middle class being dependant on these shops for two instead of six eggs or even 125gms of sugar and not a 1000gms of the same, these shops are ‘reachable’ because of their ready-availability and location. If you are lucky the shopkeepers or the help employed will not mind delivering a loaf of bread at your doorstep. With such benefits coming from the so called unorganised, yet convenient sector, one cannot envisage the future of the kirana shops.

The FDI effect will certainly be there, either visibly impacting or avoidably insignificant. It will again depend on the consumers who will naturally decide the validity of the same. In my opinion one shall compete with another. The existing retail shops that are available in our localities might have to spruce their existing conditions. The current super markets trend on the ‘everything under one roof’ arrangement. Also there are several attractive schemes that keep the consumers visiting these supermarkets. This becomes an advantage for a consumer as he or she need not go to various places to get what they want to buy.

My mother still considers the local shop (Shiva ki dukaan, in her words) her only supplier, despite, a number of complaining incidents. Also she doesn’t mind availing the attractive schemes that the nearby Reliance Fresh has to offer. In any case, she being the consumer finds her convenience and decides to go where she has to.

A convinced solution that should work for the supplier, retailer and the consumer is what the participation of FDI will and should decide. The solution will be possible with cooperation between these three sole entities without any meddling with the set policies. The FDI and its establishments in the retail should not exploit the already existing kirana shops. In fact, let us hope for a harmonious co-existence between the guest (Walmart and the like) and the host (Shop in Raju’s colony).

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rian1989

@Neha bhandarkar– are the congress paying you for this, its a bit naive on your part to write a whole article without understanding the subject matter-

eg
1 providing 24 hours electricity will allow manufacturers to
move to villages where land is cheap(low input cost) and run their
machines for 24 hours increasing efficiency and productivity and make
them competitive against the chinese,WE dont need foreign FDI for
building “cold chains” because we cannot build cold chains without
“electricity”
2 we shouldt not tax input /raw material for export
oriented industries eg no aviation fuel tax so our airlines can compete
with gulf carriers,no tax on import of machinery to increase local
manufacturing and prevent import ,no tax on land acquisition for export
industries etc*
3 we should also provide cheap loans to export oriented businesses
FDI
should only be allowed in selective industries where we need technology
and which will help exports or reduce imports i.e solar industry,IC
chip,processor fabrication, automobiles, aeronautics,aerospace, defense
etc which will create jobs here and reduce our trade deficit

Also jaswant singhs position against walmarts “price fixing” of farm
products is not “leftist” because anti-monopoly and anti cartel laws
exist in Europe and companies like “ASDA (as walmart is known in UK),
sainsbury and Tesco were fined 50 Million Pounds in 2011 for fixing the
price of milk in UK.
IN short we need manufacturing reforms and
better infrastructure like roads and ports in india so as to allow our
manufacturers to become more competitive against the chinese.We also
need to impose anti dumping duties against the chinese for rigging the
YUAN.
we also need to support all co-operative movement for agricultural product just as Amul is for milk products.

Don’t forget>>>the east India company>>>>>was FDI!!!!!!

The millions of vendors, grocers>>>>>>its not about them, its about us the people

aren’t Reliance retail, Big bazaar , More etc. enough for us??????
Or
we want to deliberately …exhaust our hard earned foreign reserves,
impact the purchasing power of rupee…which has already fallen?

I am not against big retail>>>>>it bring
efficiency>>>>>>but against hard nosed capitalist from
foreign shores, who at a drop of whim >>can kill the local
manufacturers>>>not because they want to offer cheap
products>>>>even they know its unsustainable>>>they
have the reserves>>>>that they can suffer
losess>>>and by that time kill the local grocers,
manufacturers..

We have Flipkart,Homeshop18,hypermarkets at every nook and corner of
India>>>>>>what can a foreign hand add in term of
value creation????????

Why were the reforms taken recently, only beificial for certain sectors
FDI in aviation>>>Kingfisher
FDI in retail>>>Sahara(para banking unit, facing heat due to charges of money laundering)

and reform for the common man >>>>>>>your diesel/petrol bill only became higher

The CON(dis)grace government is a power that support crony capitalists…not citizens

read, research well before writing about something, don’t get fooled by the hoopla

    neha

    Solely my opinion. Thank you for your feedback.

    rian1989

    @NehaBhandarkar10:disqus – wish …..instead of ‘ thanking me for my feedback’ …you had actually took the pain to read the feedback, ponder over it…..and pehaps written an intellectual, researched reply….or for that matter would have agreed to the facts, stats given by me above and rectified it. Ego + journalism………are a bad combination …..being unbiased and seeing both side of a coin …is responsible :)

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