Foreign Direct Investment in Indian Retail Sector...

Foreign Direct Investment in Indian Retail Sector..
FDI - FDI - FDI...

Foreign Direct Investment is a way through which an International firm can buy and invest in companies locally and can control the business operations for that company Directly. This can be done through an M&A, or can be a fresh start-up as well. In such case, the company grows with the influence of foreign business processes, which are considered transparent, robust, stronger and better as that of local versions. Another such investment form is Foreign Institutional Investor, in which the investment is not direct, its indirect through the way of equity holding. Hence FII is a kind of hot money and has no influence on business operations. So if any International investor believes in company's growth but don’t want to involve directly in its progress strategy will enter as FII, and hence if company downgrades due to any reasons, FII will escape taking back the investments made. In FDI it’s the inorganic growth that happens, or rather FDI takes care of ups and downs...

India has FDI presence in all the sectors; Infrastructure, pharmaceutical, service industry, outsourcing, banking, almost everywhere. It also includes telecom, manufacturing, insurance, and even aviation. However, FDI is also present into Retail industries but only for a single brand, which means Reebok can have a showroom in India for direct sales, but can only sale footwear and sports products which belongs to Reebok brand directly. Since years, as Indian economy has outpaced other countries in terms of GDP, So International players are utmost interested to enter India. Utmost potential that India has is its strong Internal consumption. We being Second Largest country on globe on account of Population; our Growth is coz of consumption driven internally. Eventually, that’s the problem we are into; to meet the domestic demands we are not able to Produce so Rapidly and on such Huge scale, hence our Imports are high as that of Exports. FDI and FII carry huge cash inflows into the industry, which helps and is of crucial importance.

FDI in Retail:

Today the leading government won the FDI issue which was pending since months; this will definetly boost the sentiment of investor. After long a time, economic reform has been put into consideration. I don’t care if it’s an win, as I am not so confident on future of FDI so far. I was always against the notion of FDI. It’s not like I supported the opposition party against leading party; I just favored the decision against FDI.

"FDI in Retail" mean, there are huge players in US like Wal-Mart which want to open up their multi brand multi products outlets in India. However, this may kill present retail outlets such as Big Bazaar, D-mart and Subhiksha, Reliance fresh and many others. These foreign companies in retail sector actually streamlines the process of procurement and supply chain. This does benefit the farmers, and hence eradicate the long chain of agents and wholesalers. Its "Trading of Goods" that will be suppressed and is responsible for rise in the cost of product.

D-Adv.:

Even If there are advantages of Retail FDI, I only focus on D-Adv. as I don't think we need this:

- Supply Chain Optimization - FDI is not just the means through which farmers can get their right price of product being sold; Eradicating agents, dealers is a absolutely a good way to optimize the chain. India already has a E-Choupal programme implemented by ITC which needs to be focused more; Rajasthan Maharashtra has got success stories due to E-choupal. E-choupal is a web based solution which focuses on farmers and poor infrastructure between farmers and retailers. FDI is not just the solution to improve the long chain.

- Huge Retail outlets - We already have multi brand, multi product outlets Big bazaar, Hypercity, Dmart and Reliance fresh. These are Indian startups. To suffice every home requirements, local Baniya shops does help. Present Huge Retailers have never affected the buzz of local distributor or local retailer. These FDI companies may eradicate the local baniya's and hence it will be balance of jobs imparted and jobs killed.

  

- Business Processes. If retail FDI will win the market, processes will be run by foreign people without involvement of local or domestic leaders. Which mean job prospects will increase, but in terms of workers, laborers or operational team only, whereas management and business analysis will be dominated by white skin people (Non-Indians).

- Domestic Manufacturing. This is my extreme pain point. These new retailers may ask you to move from colgate to some other huge international toothpaste. Products which hold local dominance will be forcefully replaced by better international versions. I do not doubt the quality, I question is there a need. Domestic manufactured products are very much preferable, as they generates revenue for country, labor will be put into for its production and most important no Imported products then. We are all surrounded by international brands, and International goods. I hate it.... I wish to see Micromax becoming world leader. I wish to see Vimal suitings to be world class suitings provider. PS. I am not talking about Service industry.

- Infrastructure Investment: 50% Investment to be made into Supply Chain Infrastructure. This is condition put on International firms before they enter in Indian Market. Question is who will monitor this investment?

- Control: Processes and Business guidelines for the retail industry defined at start now, will they be followed all over until the end.  Or is it the Ruling party then will be controlled by the International Company as dominance will shift from Big bazaar and local baniyas to these companies and again these companies will be Rate deciding agencies for all the products.

- Farmers Benefit: Farmers will get the correct price for their goods. This is even possible with the proper utilization of the schemes available with us. It’s the implementation issues with the current policies. Kisan Yogna and few other policies are the best schemes for farmers across globe. Who guarantees the international companies would be fair?

I am nowhere against FDI. Yes, FDI is extremely crucial for any country to grow. But in Indian scenario; Retail industry - Na we don’t need FDI..