Though the government has put on hold its decision to allow FDI in retail sector in India and entry of foreign retailers like Walmart, Tesco in the country’s $450 billion retail sector, the debate over whether government should allow it or not continues.
The greatest issue of debate over allowing 51 per cent FDI in multi-brand retail in India and 100 per cent FDI in single brand retail is like a double edged sword. While liberalisation of the Indian economy further to allow the foreign players like Walmart, Carrefour, etc to operate as retailers may go in favour of the SMEs, customers and farmers, competitive for the Indian retail big-wigs like Big Bazaar, Reliance and Aditya Birla, it may be suicidal to the local kirana shops.
The Small and Medium Enterprises (SMEs) who provide products to the multi-brand retailers at their brands warn that allowing FDI in retail sector in India may be fruitful to the SMEs as they will have increased number of retailers to provide to and the Indian retailers will pull up their socks and improve quality and make the prices more competitive. But the Chinese dragon somehow needs to be controlled from entering the Indian markets through these foreign retailers because if that happens then the entire Indian manufacturing sector and the economy will go for a toss.
“If cheap Chinese goods start getting imported in India through foreign retailers then it may not be good. If government has some kind of regulation for preventing Chinese goods entering the Indian markets then such liberalization will be good for the Indian economy. But if Chinese goods flood the Indian markets then they will take over the entire Indian market. China has a completely different model of production, which makes them produce goods at the minimum cost which is the reason Chinese goods have taken over the world,” Managing Director (MD) of Delhi-based Trisis Corp Sunil Jain said which supplies home and personal care products to Bharti Walmart, Reliance Retail, Future Group, Aditya Birla Retail, Dabur, Wipro etc.
“Chinese goods are not being stopped. Chinese electrical goods are flooding the Indian markets, but organized sector in retail is being stopped,” MD of Nainital-based processed food firm Delicia Foods India Pvt Ltd Deepak Puri said, which supplies ketchups, jams, canned fruits, etc to Bharati Walmart in Amritsar, Cash and Carry Carrefour (French co) in Delhi and Jaipur and Metro Cash and Carry (German co) in Bangalore, Kolkata, etc. Cash and Carry stores can only sell to other retailers or businesses.
Currenlty multi-brand retailers are definitely benefitting the SMEs in a big way. SMEs manufacture and supply to the big multi-brand retailers. “We started the company in 2004. We supply ketchups, jams and canned fruits to Bharati Walmart since last 3 years and to Cash and Carry Carrefour and Metro Cash and Carry since last 1 year,” Puri said.
Delicia Foods has grown over the years with the help of these multi-brand retailers. “In the 1st year we had a turnover of Rs 25 lakh. Next year it was Rs 50 lakh and then when we started supplying to the multi-brand retailers our turnover rose to Rs 75 lakh. Currently our turnover is above Rs 2 crores. The multi-brand retailers have definitely benefited the SMEs,” Puri said sighting advantages of FDI in india.
So the SMEs are definitely in favor of FDI in retail in India provided the Chinese goods have a controlled entry into the Indian markets. “FDI in retail sector should have been allowed. It is misfortune that it is not allowed. It leads to growth of business of manufacturers and suppliers both,” Puri said.
