Controversy over Indian retail reforms
A horticultural produce retail market in Kolkata, India; produce loss in these retail formats is very high for perishables Critics of the Indian retail reforms announcement are making one or more of the following points:, Independent stores will close, leading to massive job losses. Walmart employs very few people in the United States. If allowed to expand in India as much as Walmart has expanded in the United States, few thousand jobs may be created but millions will be lost. * Walmart's efficiency at supply chain management leads to "direct" procurement of goods from the supplier. In addition to eliminating the "middle-man", due to its status as the leading retailer, suppliers of goods also bend over backwards to drop prices in order to assure consistent cash flow. There is the fear that this may not benefit the farmer, or the suppliers of Walmart. * The small retailer and the middle man present in the retail industry plays a large part in supporting the local economy, since they typically themselves procure goods and services from the area they have their retail shops in. This leads to increased economic activity, and wealth redistribution. With large, efficient retailers, the corporate profits are not spent in the areas where they're generated, hence killing the local economy. * Walmart will lower prices to dump goods, get competition out of the way, become a monopoly, then raise prices. We have seen this in the case of the soft drinks industry. Pepsi and Coke came in and wiped out all the domestic brands. * India doesn't need foreign retailers, since homegrown companies and traditional markets may be able to do the job. * Work will be done by Indians, profits will go to foreigners. * Remember East India Company. It entered India as a trader and then took over politically. * There will be sterile homogene
Advantages of FDI in retail sector in India:
* Growth in economy: Due to coming of foreign companies’ new infrastructure will be build, thus real estate sector will grow consequently banking sector, as money need to be required to build infrastructure would be provided by banks.
* Job opportunities: Estimates shows that this will create about 80Lakh jobs. These career opportunities will be created mostly in retail, real estate. But it will create positive impact on others sectors as well. Read about career options in Retail sector….. * Benefits to farmers: In most cases, in the retailing business, the intermediaries have dominated the interface between the manufacturers or producers and the consumers. Hence the farmers and manufacturers lose their actual share of profit margin as the lion’s share is eaten up by the middle men. This issue can be resolved by FDI, as farmers might get contract farming where they will supply to a retailer based upon demand and will get good cash for that, they need not to search for buyers.
* Benefits to consumers: Consumer will get variety of products at low prices compared to market rates, and will have more choice to get international brands at one place.
* Lack of infrastructure in the retailing chain has been one of the common issues in India for years which has led the process to an incompetent market mechanism. For example, in spite of India being one of the largest producers of vegetables and fruits, lack of proper count of cold storages has significantly affected the selling of these perishable items. FDI might help India overcome such issues by channelizing the resources in the right manner. Disadvantages of FDI in retail sector in India:
* According to the non-government cult, FDI will drain out the country’s share of revenue to foreign countries which may cause negative impact on India’s overall economy.
* The domestic organized retail sector might not be competitive enough to tackle international players and might loose its market share.
* Many of the small business...
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