Therefore, it is odd that the decision to open FDI in retail is being described as symptomatic of government climbing out of the

rut it has dug itself into. FDI in retail isn't going to be manna. It won't lead to deluge in FDI inflows. It won't stem rupee depreciation. It won't dampen food inflation. It won't lead to a revolution in retail trade and make it organised. But nor will be it be a bane that will drive kirana stores into oblivion. Outside TV studio debates, truth is never in black-and-white. As a shade of grey, the present decision is no more than the thin edge of liberalisation. All liberalisation is good for consumers. The colour of competition (national versus foreign) doesn't matter. There is choice, better quality and better service. There is downward pressure on prices. Post-1991, this elementary proposition of economics has been empirically vindicated whenever competition has been allowed to seep in. There is no reason for consumers to be exploited by kirana stores, just as there is no reason for consumers to be exploited by the Future Group, Shoppers Stop or Vishal Retail. Having said this, there is also another elementary proposition. Perfect competition is a figment of imagination. It doesn't exist. The world is one of unfair and restrictive business practices. Hence, we need competition policy instruments. So far, thrust of competition policy intervention has been on manufacturing and some services. Retail trade hasn't figured prominently. While that focus has to change, this isn't an argument against opening up. Acrossthe-board opening up is infinitely preferable to

selective and segmented opening up. Selective liberalisation distorts markets and allows opportunities for arbitrage. Take this business of opening up wholesale cash-andcarry. Who has this benefited? It hasn't helped consumers, at least not directly. It has helped hotels and so-called kirana stores, anyone who obtained a licence or got access to one. Why did we first allow 51% FDI in single-brand retail and why are we now opting for 100%? Who has benefited from this transition in policy between 2006 and 2011? There are foreign single-brand retailers who will now rework their joint ventures and jack up foreign equity to 100%. There are Indian joint venture partners who are cash-starved. The beneficiaries will thus be Indian joint-venture partners who will sell off 49% equity. Single-brand or multi-brand, wholesale (cash-andcarry) or retail are artificial distinctions. We should simply have had 100% across-the-board. At some future date, Indian jointventure partners will benefit again when FDI multi-brand equity is jacked up to 100%. Other than this, geographical segmentation remains. Why should liberalisation be restricted to one-million-plus cities? Do consumers elsewhere not deserve choice? As it is, as public subsidies go, there are pronounced pro-urban biases. We will pamper them more through this new policy. Real-estate costs being what they are, big-bang benefits for retail should actually be outside one-million-plus cities. It gets worse if

you read the Constitution. Delhi provides a framework policy. Implementation is up to states. While Seventh Schedule doesn't quite use the expression retail, production, supply and distribution of goods is Entry 27 in the State List. To the best of my understanding, this means a state may choose not to open up retail trade. It gets worse in Sixth Schedule, since no person, "who is not a member of the Scheduled Tribes resident in the district shall carry on wholesale or retail business in any commodity except under a licence issued in that behalf by the District Council". In general, deprived and backward states and regions are reluctant to open up. That's the reason they aren't mainstreamed and continue to remain deprived and backward. Stores will be in one-million-plus locations and consumers there will benefit. I have no problems with minimum threshold levels of foreign investment, or requirements that 50% has to be in back-end infrastructure. Retail today straddles assorted segments. Food is a small component, less than 10%. It doesn't have to be that way.

The following are the main issues raised by those in favour of foreign equity in multi-brand retailingand those opposed to it:

Those against: - It will lead to closure of tens of thousands of mom-andpop shops across the country and endanger livelihood of 40 million people - It may bring down prices initially, but fuel inflation once multinational companies get a stronghold in the retail market - Farmers may be given remunerative prices initially, but eventually they will be at the mercy of big retailers - Small and medium enterprises will become victims of predatory pricing policies of multinational retailers - It will disintegrate established supply chains by encouraging monopolies of global retailers Those in favour: - It will cut intermediaries between farmers and the retailers, thereby helping them get more money for their produce - It will help in bringing down prices at retail level and calm inflation - Big retail chains will invest in supply chains which will reduce wastage, estimated at 40 percent in the case of fruits and vegetables - Small and medium enterprises will have a bigger market, along with better technology and branding - It will bring much-needed foreign investment into the

country, along with technology and global best-practices - It will actually create employment than displace people engaged in small stores - It will induce better competition in the market, thus benefiting both producers and consumers

The recent clamor about opening up the retail sector to Foreign Direct Investment (FDI) becomes a very sensitive issue, the most important factor against FDI driven modern retailing is that it is labour displacing to the extent that it can only expand by destroying the traditional retail sector. This is because the primary task of government in India is still to provide livelihoods and not create so called efficiencies of scale by creating redundancies. As per present regulations, no FDI is permitted in retail trade in India. Allowing 49% or 26% FDI (which have been the proposed figures till date) will have immediate and direct consequences. Entry of foreign players now will most definitely disrupt the current balance of the economy; will render millions of small retailers jobless by closing the small slit of opportunity available to them. Retailing is not an activity that can boost GDP by itself. It is only an intermediate value-adding process. If there arent any goods being manufactured, then there will not be many goods to be

retailed! This underlines the importance of manufacturing in a developing economy. Global retailers have already been sourcing from India; the opening up of the retail sector to the FDI has been fraught with political challenges. With politicians arguing that the global retailers will put thousands of small local players and fledging domestic chains out of business. The only opening in the retail sector so far has been to allow 51% foreign stakes in single brand consumer stores, private labels, high tech items/ items requiring specialized after sales service, medical and diagnostic items and items sourced from Indian small sector (manufactured with technology provided by the foreign collaborations). Parties supporting the FDI suggest that the FDI in retail should be opened in a gradual/ phased manner, such that it can promote competition and contribute to the growth of the Indian economy. The impact of the FDI would benefit the end user of the consumer to a great extent and will help to generate a decent amount of employment as more and more entrepreneurs would be coming forward to invest and taste the new generation in retail marketing. The opening of FDI should be designed in such a way that many sectors including agriculture, food processing, manufacturing, packaging and logistics would reap benefits. The table below lists the pros and cons of allowing FDI into retail. Benefits of FDI in Indian Retail

Inflow of investment and funds.

Improvement in the quality of employment. Generating more employment. Increased local sourcing. Provide better value to end consumers. Investments and improvement in the supply chains and warehousing.

Franchising opportunities for local entrepreneurs. Growth of infrastructure. Increased efficiency. Cost reduction. Implementation of Information Technology in retail. Stimulate infant industries and other supporting industries. Drawbacks FDI in Indian Retail

Would give rise to cut-throat competition rather than promoting incremental business.

Promoting cartels and creating monopoly. Increase in the real estate prices. Marginalize domestic entrepreneurs. The financial strength of foreign players would displace the unorganized players.

Absence of proper regulatory guidelines would induce unfair trade practices like Predatory pricing. Conclusion: Thus it can be said that this investment boom (Foreign Direct Investment) could change the face of Indian retail by offering quality goods at lower prices to the consumers. In addition to this, the presence of global retailers in Indian retail industry will further enhance exports from India as they would also source Indian goods for their international outlets in a big way leading to a remarkable increase in Indian exports.