A parliamentary standing committee on commerce in its report titled “Foreign and Domestic Investment in Retail Sector” submitted to the government has recommended imposition of a blanket ban on foreign direct investment (FDI) in retail.
“The committee…recommend that a blanket ban should be imposed on domestic corporate heavyweights and foreign retailers from entering into retail trade in grocery, fruits and vegetables,” said the report.
The committee, comprising 40 parliamentarians from various political parties from both the Loksabha and Rajyasabha, was headed by Murli Manohar Joshi- a veteran BJP parliamentarian and former HRD minister in the NDA government.
The parliamentary committee is opposed to the entry of large Indian corporates in the business of modern (organised) retailing, particularly those who sell fruits & vegetables and grocery and those who use malls to sell these products. According to the committee’s findings modern retailing results in job losses and forces small traders to go out of the business. This, though, is at complete variance with the findings of an experts panel (ICRIER) appointed by the commerce ministry to go into the impact of Big retail on conventional retailers (also referred to as ‘Kiranas‘ or ’mom-n-pop’ stores).
Not content only with the banning of large corporates from retail, the commitee also wants the government to also ban the issue of further licences for the ‘Cash & Carry’ wholesale business. Cash & Carry business is currently dominated by the world’s leading multi-brand retailers like Walmart (USA) and Metro AG (Germany). While Walmart is in equal partnership with Sunil Mittal’s Bharti Enterprises, Metro AG is operating its own. Two other foreign multi-brand retailers Tesco plc of UK and Carrefour SA of France are also in various stages of foraying into this format, which caters to the needs of bulk customers like traders, service providers, and institutions. while, Tesco has already tied up with Star Bazaar chain of Tata group, Carrefour is believed to be close to signing a deal with Kishore Biyani’s Future group.
“Government should stop issuing further licenses for ‘cash and carry’ either to the transnational retailers or to a combination of transnational retailers and the Indian partner, as it is a mere camouflage for doing retail through back door,” says the report.
India’s retail sector, according to Technopak – a well known management consultancy- is currently estimated at $372 billion. Only around 5 per cent of this trade is currently believed to be managed by modern (organised) retail. The balance 95 per cent of the retail business is still controlled by over 1.2 crore conventional small stores.
With excellent growth prospects, the retail business is likely to double in the next five 5 years. Despite this fast pace of growth, modern retail alone will not be able to meet the growwing consumer demand and, therefore, even conventional traders will also continue to grow at 5 to 6 per cent in the coming years.
On back of rising incomes, which leads to increased discretionary spending, the expenditure on food and groceries has been declining consistently. From 40% in 2003, it came down to 36% in 2008, and is expected to come down further to 32 per cent in 2013.
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4 responses so far ↓
Sudhir kumar // Jun 19, 2009 at 10:31 am
The Parliamentary committes and various groups are at liberty to give their views regarding the entry of Large corporate identities as well as Global Giants of retail Industry through the FDI route . No doubt a Free for all approach might cause some sectors to suffer in the Economy. What needs also to be emphasised is the fact that these Major Corporate identities with their deep pockets and Extensive networks / Contacts as well as the latest Systems make quite a difference in the Market place .
Developing a Effective Chain of Warehouses and an Extensive network of Supply Chain management is not something that the Government or Small retail Shop operatives can devote time and energy on . THis area can be opened up only by the Major Companies and Multi national Global Players with their extensive networks and through the so called ” Cash & Carry” concept stores.
The Employment oppurtunities these would create and the savings that these formats would result in by way of an Extensive network of Warehouses and transit points as well as the savings on the Shop floor and the range of goods availibility this would result in are angles that need to be given due consideration.
Hope the views ennumerated above reach the policy makers and the major operators and give them something to chew on. In case someone wants to join issues you are welcome to contact the undersigned for further discussions.
Kind Regards
SK
Dharnendra Doshi // Jun 20, 2009 at 3:22 pm
I wonder how much of these recommendations is based on actual economic impact and how much on vote bank politics. ICRIER report submitted few months back clearly said that entry of big players will be good in the long run for everybody.
Anyways modern retailers cannot dispel kiranas in India and will always have its own limitations.
Then why not use the advantages of modern retail.Indian Policy makers should focus on how to use these big corporates to improve the supply chain infrastructure in India which can bring overall development
BOOBALAN. R // Jun 25, 2009 at 12:31 pm
The parliamentary comittee should focus on ” RESTRUCTURING THE FDI ROUTE IN RETAIL ESPECIALLY”. since in india, after agriculture, retail sector only employs more people and contribute highly on indian GDP. So, by allowing foriegn giants like wal-mart, metero-AG etc.., will lead to get away of domestic retailers ( unorganised like kiranas stores). thus, restructuring of FDI in retail is very much importance in this scenerio.
government can go for this option:
1) more focus promoting indian brands ( 60% & rest foreign brands) in organised retailing. so that it will not affect indian products market.
2) imposing ban on fruits & vegetables, groceris in organised retail format. so, that it will not affect domestic vendors.
Raja // Jun 27, 2009 at 9:10 am
Hi
FDI policy on retail should be focussed on futuristic aspects.In the huge population country,FDI should be relaxed in retail sectore to get following aspects
1)Growing demands from consumer..consumerism in india is seeking a quality and western/better lifestyle.it can see in emerging mass middle class and Above middle..modern retail in grocery and fashion difinetly canbe opt to those requirements.
2)In Fashion sector,if foreign brand enters into india,defintly they would sourcing locally to avoid the logistics cost tradeoff,tap the potential of indian apparel supply chain,applied their marketing tactics ..this will bring more foreign invesment into india in recession period,Lot of youths and graduates get a job in supply chain,logistics and warehouse operations,retailing…there is more opportunity to improve the efficicency in logistics and supplychain… More over,foreign retailers would source locally for their others national operations..this will create more job in apparel exporting..is the youth ready to work in pop and mom stores or local kirana stores…or..are un organized retailing giving those job opportunities..it is not good to maintain restrictions in foreign retailers into india as a future aspects…more over people are going to purchase according to their income..below middle class can be targeted by local kirana stores..can fulfill diverse needs of consumer..?
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