Monday Apr 27

FDI in Retail Sector in India - Enter The Dragon - advantages of fdi in india


Major procurement of the food items, FMCG, personal care products in the big retail stores happen from small and medium enterprises. "As an individual entrepreneur I support foreign FDI in retail in India. I have been with Bharati Walmart for 2 years now. They are instrumental in our success and deal very professionally. They make SMEs more organized even train us for better techniques to increase the production. SMEs stand to gain more business from foreign multi-brand retailers," Jain said.

Along with the SMEs the agricultural sector also stands to gain from FDI in retail sector in India. "Agriculturists are gaining from the Indian retailers. Even foreign retail chains will be organizing the farmers on their entry into India. It will be a win-win situation for the farmers as the middle men will be wiped out. FDI in retail in India should help the farmers," Jain said.

Though the small retailers' (kirana shops'), which are the unorganized sector of retail, fate is a little dicey in case of FDI in retail, which is seen as major disadvantages of FDI in india. "Kirana shops are a question mark. They can be affected. Either they will have to start procuring from large cash and carry stores at competitive prices or there will be some reshuffling. Inefficient people will be wiped out in which kirana shops may become a casualty," Jain said. "Small retailers (kirana shops) do not give any bill nor do they show their incomes. It is the unorganized sector out of which government is not getting any revenues," Puri said.

Thus the small kirana shops which form the unorganized retail sector are up and against FDI in retail in India. "If big foreign retailers open stores nearby our shops, we will be closed down because no-one will buy from us," says Khetlal, a local kirana shop owner in Pune.

As far as Indian multi-brand retailers go, mergers and acquisitions will take place if retail sector is liberalized. "Mergers and acquisitions will take place if FDI in retail is liberalized. Some of them may get taken over by foreign retail or vice versa. Indian retailers are very competent and reforms have always helped India," Jain said.

One thing is sure, if FDI in the retail sector in India is allowed it will be the survival of the fittest. Better quality will sustain when competition rises amongst Big Bazaar, Carrefour, etc. "Whoever is sustaining it means they are providing better quality. Walmart is not East India Company," Puri said. This is an obvious advantages of FDI in india.

Currently approximately 33 million people or 7.3% of India's workforce is said to belong to the unorganized retail sector, including the kirana stores. Only 5% of the retail sector is said to be organized.

Though entry of foreign entrants in the retail sector throgh FDI in retail sector in India may organize our retail sector, the main challenge before the government will be to control or dissuade the entry of Chinese goods in the Indian markets. Keeping in mind the benefits to the SMEs, consumers and farmers or keeping the existence of the kirana shops in mind, each may argue about advantages of FDI in india or disadvantages of FDI in india, but one thing that comes out very clearly is that we need to be beware of the Chinese dragon.

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