'FDI in retail wont hurt small retailers' According to the industry body, FDI in multi-brand retail will give

a boost to the organised retail sector, which will positively impact several stakeholders including farmers, consumers, MSMEs and hence the overall economy. According to a CII study, FDI in retail will help increase organized retail market size to $260 billion by 2020 and this would result in an aggregate increase in income of $35-45 billion per year for all producers combined. The new decision will also helps generate 3-4 million new direct jobs and around 4-6 million indirect jobs in the logistics sector, contract labour in the distribution and repackaging centers, housekeeping and security staff in stores. The government also stands to gain by this move and can be expected to receive an additional income of $25-30 billion by way of increased tax collection and reduction of tax slippages, the study said.

FDI in Multi Brand Retail - (Feature)

The Government has decided to allow Foreign Direct Investment (FDI) upto 51% in multi brand retail. This means that global retailers can come to India with a local partner and set up stores in the country. Till now FDI was not allowed in multi brand retail. However, there were big multi brand retail outlets owned by Indian entities. This decision is an enabling policy that will open up new windows of opportunity to modernize the retail sector particularly for agricultural products and the small-scale sector. The benefits would be for all: The farmer will get a better price for their produce as middlemen will be removed and retailers will buy directly from farmers. Farmers losses from wastages specially in vegetables and fruits will come down. The small scale sector will find new buyers and cheap and better quality source for their products. Consumers will get better prices and greater variety from these stores. The entry of global players will encourage existing traders and retail outlets to upgrade and become more efficient, thereby providing better services to the consumers as also better remuneration to the producers from whom they source their products. This is also one of the most effective ways to tackle rise in food prices and inflation due to availability of food items on lower prices. Today India is one of the largest producers of fruits and vegetables in the world. However 3040% of food and vegetable products go waste due to lack of storage and cold chain facilities. This decision will bring in funds for investment to improve supply chain infrastructure such as cold storage, transportation and procurement along with bringing in investment for growth of the economy. This will bring huge employment opportunities in agro-processing, sorting, marketing and the frontend retail business. As per some estimates upto 10 million jobs will be created in coming years. Government has provided safeguards to protect national interest such as:

Minimum investment by the global retailer will be $ 100 million and 50% of which will be in backend infrastructure that will control wastage and help local farmers. Backend infrastructure will be in or near villages and will be of immense value for rural economy. It has been made mandatory that 30% sourcing will be done from Indian small industry. This will promote local manufacturing, as Indian small industries will feel encouraged to expand capacities in manufacturing thereby creating more employment and also strengthening the manufacturing base of the country. These stores can be set up only in cities with the population of more than 10 lakh. This provision along with the requirement of master/zonal plans will make sure that small retailers are not affected. Moreover small retailers can benefit from sourcing their products from deep discount wholesale cash-and-carry big retailers. This will improve quality of their product and reduce their cost. In order to ensure supply to ration shops (PDS) government will have the first right to the procurement of agricultural products. This is important from food security point of view also. Some people fear that big retailers will destroy small traders by keeping low prices initially (predatory pricing). However, Competition Commission of India will not allow this to happen. As the policy will be implemented in only 53 cities (with population over 10 lakh) which will make it difficult for big retailers to crush competition. In many developing countries like China, Thailand, Indonesia, Brazil, Argentina, and Singapore, where 100% FDI is allowed, small retailers are successfully co-existing with big retailers. Indian labour will continue to be protected by Indian labour law. It is an enabling policy framework. States are free to adopt it or leave it. Those states that do not want to have FDI in retail are free not to allow them. This is done to maintain the freedom of states in federal structure. FDI policy does not override the existing laws governing, trade and commerce in the country. The State Government laws and regulations in this regard would apply as much to the foreign players as to the establishment of any domestic businesses in the retail sector. (Source PIB)

Government argument * Huge investments in the retail sector will see gainful employment opportunities in agroprocessing, sorting, marketing, logistics management and front-end retail. * At least 10 million jobs will be created in the next three years in the retail sector. * FDI in retail will help farmers secure remunerative prices by eliminating exploitative middlemen. * Foreign retail majors will ensure supply chain efficiencies. * Policy mandates a minimum investment of $100 million with at least half the amount to be invested in back-end infrastructure, including cold chains, refrigeration, transportation, packing, sorting and processing. This is expected to considerably reduce post-harvest losses. *This will have a salutary impact on food inflation from efficiencies in supply chain. This is also because food, which perishes due to inadequate infrastructure, will not be wasted. * Sourcing of a minimum of 30% from Indian micro and small industry is mandatory. This will provide the scales to encourage domestic value addition and manufacturing, thereby creating a multiplier effect for employment, technology upgradation and income generation. * A strong legal framework in the form of the Competition Commission is available to deal with any anti-competitive practices, including predatory pricing. * There has been impressive growth in retail and wholesale trade after China approved 100% FDI in retail. Thailand has experienced tremendous growth in the agro-processing industry. * In Indonesia, even after several years of emergence of supermarkets, 90% of fresh food and 70% of all food is still controlled by traditional retailers. * In any case, organized retail through Indian corporates is permissible. Experience of the last decade shows small retailers have flourished in harmony with large outlets.

Opposition's argument * Move will lead to large-scale job losses. International experience shows supermarkets invariably displace small retailers. Small retail has virtually been wiped out in developed countries like the US and in Europe. South East Asian countries had to impose stringent zoning and licensing regulations to restrict growth of supermarkets after small retailers were getting displaced. India has the highest shopping density in the world with 11 shops per 1,000 people. It has 1.2 crore shops employing over 4 crore people; 95% of these are small shops run by selfemployed people * Global retail giants will resort to predatory pricing to create monopoly/oligopoly. This can result in essentials, including food supplies, being controlled by foreign organizations. * Fragmented markets give larger options to consumers. Consolidated markets make the consumer captive. Allowing foreign players with deep pockets leads to consolidation. International retail does not create additional markets, it merely displaces existing markets. * Jobs in the manufacturing sector will be lost because structured international retail makes purchases internationally and not from domestic sources. This has been the experience of most countries which have allowed FDI in retail. * Argument that only foreign players can create the supply chain for farm produce is bogus. International retail players have no role in building roads or generating power. They are only required to create storage facilities and cold chains. This could be done by governments in India. * Comparison between India and China is misplaced. China is predominantly a manufacturing economy. It's the largest supplier to Wal-Mart and other international majors. It obviously cannot say no to these chains opening stores in China when it is a global supplier to them. India in contrast will lose both manufacturing and services jobs.

Times View In principle, governments should not prevent anybody, Indian or foreign, from setting up any business unless there are very good reasons to do so. Hence, unless it can be shown that FDI in retail will do more harm than good for the economy, it should be allowed. A major argument given by opponents of FDI in retail is that there will be major job losses. Frankly, the jury is out on whether this is the case or not, with different studies claiming different findings. Big retail chains are actually going to hire a lot of people. So, in the short run, there will be a spurt in jobs. Eventually, there's likely to be a redistribution of jobs with some drying up (like that of middlemen) and some new ones sprouting up. Fears of small shopkeepers getting displaced are vastly exaggerated. When domestic majors were allowed to invest in retail, both supermarket chains and neighbourhood pop-and-mom stores coexisted. It's not going to be any different when FDI in retail is allowed. Who, after all, will give home delivery? The local kirana. Why would anyone shun them? If anything, the entry of retail big boys is likely to hot up competition, giving consumers a better deal, both in prices and choices. Mega retail chains need to keep price points low and attractive that's the USP of their business. This is done by smart procurement and inventory management: Good practices from which Indian retail can also learn. The argument that farmers will suffer once global retail has developed a virtual monopoly is also weak. To begin with, it's very unlikely that global retail will ever become monopolies. Stores like Wal-Mart or Tesco are by definition few, on the outskirts of cities (to keep real estate costs low), and can't intrude into the territory of local kiranas. So, how will they gobble up the local guy? Secondly, it can't be anyone's case that farmers are getting a good deal right now. The fact is that farmers barely subsist while middlemen take the cream. Let's not get dreamy about this unequal relationship.