FDI in Indian retail – scope and out of scope – will Walmart sign SoW with India

So finally UPA government under Chidambaram found courage to open up retail sector especially in multi brand format for FDI. Now many people are up in arms against and in the same time there are lot of voices in favour of it. Is it going to really destroy kirana shops and no answer as experts are vary of it. We can hope that it will bring professionalism in that sector.

Currently in retail, many say farmers are in the receiving end as they are not able to get good value for their produce. People argue that farmers will get a raw deal as big retails build their logistics and procure directly from them. But even today farmers who are making use of their intelligence are earning a lot. Those who are averse to the current scenario’s sell them to middlemen often called in commission agents locally. So will they really lose their jobs, i say a big no as they can still act like farmers and can still continue to sell them to multinationals since most of farmers are unaware of this process. To make a change first in this highly globalized world education to the farmers on how this process works in a foremost thing.

Next i will come to kirana shops, they always carry a first mover advantage and a good retailer who is not greedy and reputation will still command a set of loyal customers even if walmart is in neighbourhood. Only thing he needs to do is reinvent himself in this changing times. All walmart stores in single brand retail in partnership with Bharti group are yet to turn black and keeps on accumulating losses. They need to pay a lot in getting a decent place in this high real estate prices.

Indians are big discount buyers and even if big brothers give huge discounts to get high footfalls, it will lose steam once discount is over. (In annual walmart discount sale in US, Indians are the one who stand in queue to enter like booking TATKAL tickets). So at the end they are not going to succeed.

Finally even FUTURE group under retail mogul Kishore Biyani is struggling to book profits and under heavy debts it sold pantaloon to Aditya Birla group. So odds are against them and no worry to Indian kirana stores and a happy ending for them.

Impact of FDI in Retail in India

There is a lot hue and cry regarding the government’s policy decision to allow 100% FDI in single brand retail. But i guess there is an unwarranted buzz generated and government has to clear lot of misconceptions. To my opinion its good that they open up with clause stating that 30% has to be sourced from local people. Foreign investment in Retail may create a good supply chain relationship and network with the farmer able to directly engage with the retailer and may get a better price for his produce.

Currently the people in between, whom we call as brokers make a killing but systematic manipulation of prices and farmers never get a good price for their produce. But there should be checks to prevent a scenario where farmers are held in ransom by multinationals and threatening them by quoting low prices. We also face a situation where there is a possibility of market getting flooded with cheap chinese products and local producers will be left in lurch affecting  the entire economy of our Country.

Competition makes the smaller traders to serve better with a smile to customers. Local Kirana stores will not lose out business as feared by people.