FDI in multi-brand retail will hurt all

An exercise is on to spread the impression that the Government's decision to invite up to 51 per cent foreign direct investment in multi-brand retail will transform the economy for the better. The fact is that foreign retailers care less for consumers and more for profits Even as a storm blows furiously over the Union Governments decision to allow foreign direct investment in multi-brand retail, one of the best-known brands has opened a number of outlets in Uttar Pradesh, riding piggyback on an Indian company and taking advantage of a 2009 decision to open up single-brand retail sector to foreign firms. One of them is known to have opened several outlets in the State. This has happened against opposition from Chief Minister Mayawati and the BJPs campaigner in the state, Uma Bharati. There are many such instances elsewhere too. Another multinational corporation brand opened its outlet in one of Delhis poorest areas, Seemapuri, two years ago and is reportedly doing well. Many such outlets have opened in Punjab, Andhra Pradesh and other States, notwithstanding the opposition at political levels. All over the country many such outlets have been opened, but often in names different from the parent company. This is not a healthy trend. It needs to be questioned why the operators are setting up shops on the sly. The stores are said to have made huge profits as the prices of commodities soared. The consumers were not passed on the benefit of lower prices, contrary to what the big retailers claim. The consumers are made to spend more in reality as the stores bunch up goods for sale, announcing a hypothetical cut which is never more than one to two per cent of the listed price. The potato farmers in Haryana and some parts of Uttar Pradesh are facing a piquant situation. Some of these MNC operators encouraged them to sow a particular type of potato, assuring them that they would buy back all the harvest. Now there is a glut, potato prices are crashing and the promoters are refusing to buy. It has made deep holes in farmers pockets. These are only some instances of how big retailers, even before they are fully operational, behave with the farmers and rarely give any relief to the consumer.

The relief in the form of lower prices is more often a myth; consumers in US and Europe know it. This is not a good beginning for India. Often it is being argued that the step would not affect small retailers numbering over four crore in the country and involving another four crore. Many small shops all over the country have closed down as prices soared and they went into losses during the past two years. It calls for a probe whether prices are being manipulated by the large MNC chains. It gives Indian retailers a bad name and paves the way for the entry of foreign brands. The onslaught on the nation and the masses has come in many ways during the past few weeks. The FDI in retail opening doors to giant retail MNCs has been given the green signal. The decision to allow 100 per cent FDI in single-brand retail and 51 per cent in multi-brand retail has been taken at a crucial time. The Indian retail market size is of $28 billion and expected to rise almost ten-fold by 2020 to $260 billion. The earlier decision to allow FDI in single-brand retail was also taken at a similar crucial time shortly before the 2009 general election. Now it has been taken at a time when many States including the politically significant Uttar Pradesh go to polls in a few months from now in 2012. The decision may play havoc with millions of poor retail traders but it is certain to boost the coffers of some political parties and corporates. The Government has taken precaution to shut its critics, including some of its allies, who have been saying that FDI in multi-brand retail would hurt small retailers. It says that the companies have to invest a minimum of $100 million to start business here. The corporate are flush with funds and $100 million is not an obstacle that they cannot handle. The promise of opening up 30 to 40 lakh jobs (as against a loss of 3.6 crore jobs) sounds highly unrealistic, as retail chains do not employ large numbers. The losses to the nation outweigh the euphemistic gains. It would also open up a floodgate of cheap imports by big chains. The large retailers also are known to be poor pay-masters and flout labour laws with impunity. There is another threat. The Government says the retail chains would offer products at economical prices as a result of growing competition. In reality, they would be free to set the prices and the Government would have little say.

(Anu we can use this ) comments hai experts ke SURESH AHUJA I cant understand that why everyone is trying to compare FDI in Single Brand with that of Multi Brand. FDI in Single Brands are always most welcome in the country as they come with their ESTABLISHED PRODUCT BRAND which is Time Tested & Accepted amongst masses world wide which is bound to give a welcome competition to our own products. As against this FDI in Multy Brand will not do the same.At times Multy Brand Players may indulge into Price Jugglery unhealthy for country's production base . I still have to a data based, well reasoned article on the pros and cons of this decision to allow for FDI in retail. At the face of it, it looks, Indian government is willing to allow FDI in retail to bring in capital and streamline the retail sector by bringing in big players. The obvious problem here is that foreign capital that comes in will leave the country at some point as investment + profits. All the arguments I hear as pros fall into three categoreis 1) better products with guaranteed quality 2) more accountability in turn more taxes collected 3) bigger and branded retail chains being able to streamline procurement and sale of goods benefitting people at both ends. However, on closer inspection, looks like all these factors will also be applicable to any big retail even if it is not FDI. Like the way Reliance and some other chains are already doing. The arguments to allow FDI specifically as against encouraging the budding chain retail industry are not clearly made anywhere. Retailers in the west are bleeding and hence they want our market. Do we love big malls, big shops and big amusement parks at the cost of the cornerstore grocer. Agreed, none of us like the mean grocer with his sulky face but think with your brain and see with your eyes. It is a BLATANT lie that they withstood the

reliances and bigbazaars of this country. Only 2 in 5 did, 3 collapsed, but the pink papers and analyst firms hide that fact. It is a shame that after 64 yrs of independence, we still want the WEST to come in and save our farmers? India has several billion dollar groups. Given the right encouragement, entrapreneurs will setup the cold supply chain? Why not encourage them? Govt says big box retail will buy from farmers? They cant now though rules allow them because of the political Middleman. How will it change then? Why cant govt. remove the political middleman and bring in transparency instead of trying to end both the middleman and the farmer. Why would then our retailers need the middleman We all understand that India loses a lot in cold chain, but very few people understand that we have been investing heavily in cold chain warehouses all along (atleast the politically aware do so). Farmers lose only because the middleman doesnt allow them to bypass them. Big Box will ignore both if they dont listen. So who loses? Why is pantaloon happy and is inviting FDI? look at their balance sheet and the balance sheets of all top indian retailers. They all need more capital to rectify the mistakes of unbridled expansion in earlier years based on wrong reports of a Virgin Market. When big states like UP, Maharashtra, Gujarat, w.bengal, tamilnadu are opposing it, whom did the govt.consult? Govt.says its states prerogative after rule is passed. I ask, why pass something which states do not want? THINK BEFORE YOU WRITE MY FRIENDS. LOT OF PEOPLE'S LIVES ARE AT STAKE AND THEY UNFORTUNATELY DO NOT KNOW INTERNET TO RESPOND TO YOU. No Doubt the govt must have done lot of due diligence before announcing something but do not discredit the protestors blindly please. Listen to them as well. They might really have some valid pts. India with FDI 1. + better supply chain management will reduce wastage.

2. + squeeze profit out of buying and selling in huge numbers so chances that both farmers and consumer wins. 1. - Mega retailers will come to India for profit and NOT for better India! like giving jobs to India, blah blah blah. 2. - Are our small time retailers, farmers have access to skills and knowledge to compete with foriegners.Farmers will have to sell their product now at a rate minimum all over world. The developed countries produce more than 5 times from the same field what indian farmers produce. so foreign farmers can afford to sell at much cheaper than what Indian farmers can. 3. - Any empire whether it political or corporate once become huge tries to control the things as much as possible so as to increase the profit. When I am giving one of the important and sensitive business to an outsider, whose sole aim is increase his business/profit, I am going to first think how it fits into my crusade for financial freedom and security. 4. - Not only the foriegn product but also the foriegn culture will be imported though these products. We are already at crosspoints. local media is trying hard to sell bigboss, the vulgarity and insane stuff. They go to an extent where they invite port star on program. And our kids out of curiosity search her name on web just to end up on a porn site. Adding foreign retail chain will add another dimension to this problem. Though we are going to save on reduced wastage from FDI's efficient supply chian managements it will get offset by the profits they will take away from here. The profits they are going to take away from India will be much more than what they will save India by reduced wastage. They will surely eatup more jobs then they are going to provide. The important one, they will transform our huge entrepreneurs class into service class. I see the financial gains from FDI will get offset to a certain extent. And as India financially we may not get anything there. But in long term the list of what we are going to loose is long. our business, our financial independence, our culture, our risk taking entrepreneurs, etc

my strongest opinion is that we should first try our best chance to implement a good ecosystem of production-storage-distribution by ourselves and if that doesn't work then we should start thinking of FDI in retail. outsourcing governance level problems may lead to attarct East India Company type of Intervention.

The policy on single-brand retail may scuttle, rather than encourage, FDI
After long delays, government has liberalised single-brand retail, permitting 100% foreign direct investment (FDI), subject to certain conditionalities. Seen as a welcome move - especially given the economic and political scenario today - it prompted many to believe that this would receive an enthusiastic response from foreign investors. However, this does not seem to be the case, in large part due to the stipulation: requiring sourcing of 30% of the 'value of products sold' from 'Indian small industries/village and cottage industries, artisans and craftsmen', for proposals involving more than 51% FDI. The policy defines small industries as those with a total investment in plant and machinery of not exceeding $1 million at the time of installation without providing for depreciation. Also, the company and its statutory auditors are required to certify compliance with this condition. While a detailed examination of the impact of this change on government's commitments under the WTO regime remains due, the policy appears to have been inspired by well-placed aspirations of stimulating Indian enterprises. The amendment suffers from lack of clear enunciation and may scuttle FDI beyond 51% in this sector rather than encouraging it. The earlier condition requiring the foreign investor to be the brand owner came with its own issues, since it has been often seen, especially in luxury retail, that for strategic business and tax efficiencies, the brand is typically housed in an entity separate from the investing entity. The introduction of the 30% rule complicates matters further, since it appears to be based on the assumption that the manufacturing entity and the investor/retailer entities are the same or are located in the same jurisdiction, which is often not the case. In fact, some luxury retailers with global presence only have a handful of manufacturing hubs. Clarity is required on whether compliance with the 30% rule -

by the manufacturing entity (which may be a different entity within the same group) - would suffice. The expression 'value of the products' - whether this means cost price, ex-factory price or sale price (inclusive of taxes) - remains ambiguous. The potential impact of the interpretation could be onerous, especially on the uber-luxury sector. Also, whether the 30% rule is applicable separately to each product sold or to the aggregate value of all the products proposed to be sold, is not clear. This assumes significance given that a retailer may choose to retail only some products in India - and, in such a case, it needs to be examined whether the rule would need to be complied for the specific products being retailed in India. While certain classes of retailers such as those retailing furniture or apparel may be able to comply with the 30% requirement, there still remains a large segment of retailers - such as luxury watches and crystal products - whose products are not per se amenable to the 30% rule. Additionally, it may also not be possible for retailers whose products derive value from certain geographical indicators - such as Thai silk - to relocate their manufacturing facilities to India. In both such cases, all that the retailers may possibly source from the Indian local market is other ancillary materials such as packing materials. However, there is no indication whether the 30% rule mandates sourcing of raw materials only, or would sourcing of ancillary materials comply with the rule. In any case, given the brand value and goodwill associated with luxury brands, how willing foreign retailers would be to rely on local manufacturing processes and quality standards needs to be seen. ( We can use this anu ) This notification of 100% FDI in single-retail will definitely impact selfemployment based firms like tailoring outfits, local shoe makers thereby throwing their livelihoods onto streets. Local small business would be affected in a negative way. Opening the shutters to foreign retail businessess with no proper guidelines in place will be a disaster for the country. As it is the huge trade and current account imbalances, huge budget deficits is leading to one direction which will be a massive default on the part of India as it happened for Brazil, Argentine and other

countries. In case of India when this happens the whole country will go down in choas leading to a disaster never seen since the dawn of history for mankind. Indian companies like L & T who boast of being an engineering marvel, cannot on the world stage compete with even a third rated Turkish or Thailand company. Take the case of Iran where companies such as L & T, Essar,ONGC could have had a feild day. These companies have not been able to even land a signal contract of over ten million dollars, citing the excuse of US sanctions being in the way which is a blatant lie.