Response to question for Jan 7-13: FDI IN MULTI-BRAND RETAIL HAS FINALLY BEEN PASSED. WHAT WOULD BE THE IMMEDIATE BENEFITS, AND FOR WHOM?
The Indian Retail Industry, valued at $270 billion, is also one of the fastest developing ones in the world. With organised retail forming just a minor 4.5% of it, the introduction of FDI in multi brand retail in India is an ominous sign for the economy as well as the industry.
The move will help invite new entrants into the market thus serving a purpose of improving the domestic competition along with bringing investment into the country. Moreover, at a time when the country was facing economic troubles, the move ensures huge inflows of foreign exchange as the industries start setting up their infrastructural base in India. Ikea has already announced a $250 million plan for investment into India. Such initiatives will not only help in job creation and employment but also help the country gain in terms of capital and technical knowledge, thus improving the overall quality of products.
In the immediate future, even the kirana stores be unaffected by the FDI. In order to compete, the companies will first have to set up supply chains and logistical capabilities, spurring significant improvements in the infrastructure needed to source, ship, store and deliver products. Also, it will induce investments from the competitors thus acting as a force multiplier. All this projects a prosperous picture of quality product available to the consumer without the hassles of middlemen or trade monopolies.
Under new rules, firms have to source 30% of the value of goods purchased from small- and midsized domestic suppliers. This ensures that the benefit will also be available to the grassroot level contributors and merely ‘foreign goods’ are not provided to Indian constumers. Most of the foreign forms will have to partner with Indian forms to enter the market to set up retail chains. This also adds to the employment opportunities as the firms will have to educate and train large number of workers.
Hence, allowing FDI in multi brand retail is a welcome move by the Indian government and it will greatly benefit the economy to recover towards a booming GDP as well as provide assistance to small and medium sized suppliers.
Dhawal Pratap Singh