Retail in Indian industry is a win – win situation for both the Farmers and certainly the Small Business men. It would help the Consumers in India and is also expected to grow almost three times its current level to $660 billion by 2015. As of today the growth of organized retailing in India has been negligible as compared to the rest of the World. This stems from the absence of an FDI Encouraging Policy which has only today been advocated by a large number of Politicians in the Parliament and the Bill has since been passed. The Politicians who were against this bill, may be, was due to their Total Ignorance of the benefits that would accrue or they did not desire the bill to go through because of their own selfish motives?
FDI Today would create opportunities for even small Businessmen, Farmers, and also spur Investment in the Infrastructure Sector which will bring benefits to all Consumers as well, as to my mind will lower Food prices which are prevalent today. One could take the example of the Direct Foreign Investment Policies that Brazil and China adapted, as also a large many Developing Economies which had accepted the FDI protocol and see how well they have progressed!!
The dismal situation of the Retail Sector in India today, despite the on-going wave of incessant liberalization and globalization stems from the absence of an FDI Encouraging Policy in the Indian Retail Sector.
With the latest move of the Government, to allow FDI in the multibrand retailing sector we will now begin to have a positive effect on Farmers and the Agri- Food Sector and improve their Economy. This will also usher the much needed investments and expertise into the supply chain development, that could more efficiently link Farmers directly to markets thus minimizing losses due to inadequate storage and transportation facilities and kicking out the middle men. (the Artia’s). This will certainly achieve remunerative prices for our Farmers. The Government also has given approval for the Single Brand retail outlets as also FDI in Multibrand retailing, which I believe was till today prohibited in the Country. We now have to cater for the convenience of our People who traditionally enjoyed the calling up, the Corner Grocery’s Kirana Store which offers credit and flexible conditions for product returns and exchange. One can also see that Stores such as the Big Bazars have already mushroomed since they give steep discounts and bulk prices. It will also be seen that retail shops such as Reliance may have to close down at some of their locations as most shoppers prefer the convenience and access offered by the local Kirana Stores, but these would be few and far between.
How Will it Help?
How would Western multibrand stores gain access to the average Indian household? China who have experience in this must have gained and brought some understanding on Catering to a large diverse market that they have and follow perspectives of a pattern on buying behaviors in Asian households. The Government therefore must now focus more on understanding the individual Indian Customers requirements who must be made aware as to how they would gain through FDI. It is also possible that some Retail giants will get some quick wins while reaching out to the Consumer. They can well harness their expertise with cold storage technologies to lure Customers with fresh and exotic vegetables, fruits and organic produce. We must immediately lay emphasis on the access that they can create for a range of inspirational global foods and household brands. These Giants must certainly also support our Domestic Farmers with raw materials to sow what the consumer wants. Each State must get its share for their advancement and it would be the job of the Government to ensure that FDI benefits are distributed taking into account the environment and weather conditions, prevalent in the North and in the South. Farmers must be encouraged to expand the fruits market in the North and in the South help them to grow spices best suited to specific areas. A comprehensive Policy needs to worked out.
We must recognize that it will be up to Individual States to implement these Big reforms progressively and in 2013, invite outside member companies and encourage them to visit all our States and facilitate as also educate them as to how the FDI will boost our total economy after special study is carried out by them.
In Jan 2012, The Government approved reforms for the Single Brand Stores welcoming anyone in the World to innovate in our retail market with 100% ownership. Some restrictions were laid which must be studied further, and modified if required.
Some Foreign Brands have today wholly owned subsidiaries in manufacturing and are treated as Indian Companies who can sell products to Indian consumers by franchising internal distributors through their own outlets.
Reforms to be Implemented
The Government has already announced some reforms to be implemented in the retail sector such as
1. Allowing FDI up to 51% in the multi brand sector.
2. Single Brand retailers can even own 100%.
3. The Retailers both Single and Multi brand will have to however source at least 30% of their goods from Small and Medium size Indian suppliers.
4. All Retail Stores can now open their Operations in Towns and Cities which have populations over 1 million. That would mean out of approximately 7935 Towns and Cities in India. However only 55 Cities suffice such criteria as of today.
The opening of Retail Competition Policy will also have to be within the parameters of State Laws and Regulations. The Indian retail industry at present is the fifth largest retail destination and the second most attractive market for investment in the World. As a whole Indian retail must make life convenient easy, quick and affordable. Till 1980 retail continued in the form of Kiranas (that is unorganized retailing). Later In 1990’s branded retail outlets came into existence. Today big players like Tata’s, Reliance, Bharti’s, ITC and other reputed companies have entered into the Organized retail business.
The Challenges which face retailing today are as under:
1. Competition from unorganized sector.
2. The Tax structure today favors small retail business
3. Management and Infrastructure which is absent today will have to be looked into.
The status of the Retail industry will depend mostly on External Factors and Government regulations and policies. The Banks also must support the unorganized sector and not be over cautious.
The Mandis and the Wholesale Markets are today governed under the State APMC Acts which are NON-TRANSPARENT and the Farmers who toil and sweat realize only a pittance of the price paid by the Final Consumer. An example would be, say the cost of growing one Tomato with the Farmer is X, but by the time this Tomato reaches the Consumer it can go up to X plus 10. This shows that the State acts regulations for APMC’s and other MANDIS is ridiculous. It shows that the middle man is eating up the POOR FARMER and the already dead AAM ADMI. Why does this happen? It is due to the absence of a Farm to Fork supply system. It is because of the lack of Infrastructure, Cold Storage facilities and distance of the Product to the Consumer. It also fails the test of possessing the latest technology. We have to improve same immediately.
It is imperative that FDI in our retail sector must ensure adequate flow of Capital, with productive use, which will promote an all round healthy Welfare for the Society, as also the Farmers and Consumers. Income of Farmers with modern techniques of agriculture and production with minimum loss of the product will in the end bring great relief and help to curb inflation. Lastly, it is to be noted that the Indian Council of Research and International Economic Relations (ICRIER), a Premier Economic think tank of the Country, which was appointed to look into the impact of BIG capital in the retail sector, had projected the worth of the Indian Retail sector to reach $496 billion by 2011-12 which has not been achieved. The Investment in the Retail sector will in the long run improve the condition and safe – guard the interest of the small traditional Retailer as also improve the Economic condition of the Farmer. Therefore allowing healthy FDI in the Country will definitely lead to a substantial surge in our GDP as also help in our Economic Development. The fruits of the Indian retail market will also identify itself with the International retail market rates. This would not only help the Country but will certainly generate more employment and jobs for all segments of our Society and will tremendously improve the ENTIRE ECONOMY OF OUR COUNTRY. The International Retail Players share the same view and insist on a clear path towards 100 % opening up in the near future. Large Multinational Retailers that operate in wholesale cash and carry ventures in India , have also been demanding liberalization of FDI rules on multi brand retail for some time. This must also be studied and implemented.
Various Farmer Associations in the Country have announced their support for the retail reforms. The retail trade in India will now undergo an intensive structural change. The existing regulations may not be adequate to fulfill the new requirements. A large percentage of our Farmers today till their land with the help of oxen’s and hand ploughs. The World market survey shows that our Farmers are in the top bracket who till the land with ploughs. Why do we not immediately get Tractors from China which are the cheapest and allocate each State a number of them? This would be the first step. The Government must also upgrade Traditional Retail as of now under the Municipality and replace it with a National Umbrella Policy. This would have a broad base approach and would allow development of Super Markets together. Upgrading wholesale markets Infrastructure and Services is important to the whole traditional supply chain and small traditional retailers must be helped through Private sector Finances. Such programmes are emerging to help small farmers and direct procurement could be linked for products like, Fish and Vegetables. Government also needs to supplement Private efforts with public investment for training and market information to ensure success. We should also include regulations for the establishment of large Retail Projects in the States Regional Planning documents. So the neighboring Municipalities need to be strengthened by a new law. Future Investors must prove that their Infrastructure projects will not affect retail shops or the smaller traders in the locality. There should also be a regulation whereby misleading statements and advertisements would forbid a number of presently adopted practices which are regarded as dishonest and today come under the Unfair Trade Practice Laws.
A PAT TO THE GOVERNMENT AND PARLIAMENT
In the end I Congratulate the present Government to have announced the forming of a CABINET COMMITTEE ON INVESTMENT a body to recommend and plan our future Infrastructural Development, which must be monitored under the Prime Minister and Projects passed by the Prime Minister himself. I sincerely hope and pray that such a Body consisting of our Elected Representatives in Parliament will be HONEST AND STRONG in their dealings and would not resort to any type of Cheating the People of India for petty gains. UNTIL NOW RETAIL Giants have never ever become Monopolies – rather they have managed to help and check on the Food Inflation THROUGH COMPETITIVE PRACTICES.
The time has come “WAKE UP INDIA – LETS GET OUR ACT TOGETHER”