Fdi in Retail Sector in India
FDI in Retail is a Great Opportunity
Much of the reaction to the opening of retail sector does not take into account an important fact: businesses fail
The Union government, after the recent petrol price increase, may be in a mood for reforms. Opening multi-brand for foreign direct investment (FDI) seems to be the next logical step. Thinking about international retailers, the US-based retailer Wal-Mart often springs to mind. Wal-Mart is symbolic of foreign retailers so this is not surprising. It may, however, be useful to take Wal-Mart as a case in point and examine the implications of the possible “opening” of retail for Wal-Mart and other foreign retailers. For India, there is much to gain and little to lose.
Wal-Mart already has a presence in India, albeit as a joint venture with Bharti (which manages the retail end of the business). Majority ownership is the thorn in the flesh for those opposed to foreign retail. Responding to concerns about its impact on small-scale industry, Union minister for micro, small and medium enterprises, Virbhadra Singh commented last year: “India is a very big country. There are retailers in every village and city. How many stores will open?” There is no escaping from this fact. According to the 2011 census, India has 45 cities with a population of over one million. With a total population of approximately 113 million in these cities, less than 10% of the country’s population is likely to be directly affected. Indeed, how many stores will be opened or can be opened?
The small sector is unlikely to remain unaffected if big retail chains enter the Indian market. But from the perspective of the Indian economy the gains to, or protection for, any particular group should be viewed in the context of losses or costs to the country as a whole. To the extent global retailers improve efficiency (for instance, through lower prices or less wastage via improved supply chain management), the cost of protecting the neighbourhood kiranas, or the
Much of the reaction to the opening of retail sector does not take into account an important fact: businesses fail
The Union government, after the recent petrol price increase, may be in a mood for reforms. Opening multi-brand for foreign direct investment (FDI) seems to be the next logical step. Thinking about international retailers, the US-based retailer Wal-Mart often springs to mind. Wal-Mart is symbolic of foreign retailers so this is not surprising. It may, however, be useful to take Wal-Mart as a case in point and examine the implications of the possible “opening” of retail for Wal-Mart and other foreign retailers. For India, there is much to gain and little to lose.
Wal-Mart already has a presence in India, albeit as a joint venture with Bharti (which manages the retail end of the business). Majority ownership is the thorn in the flesh for those opposed to foreign retail. Responding to concerns about its impact on small-scale industry, Union minister for micro, small and medium enterprises, Virbhadra Singh commented last year: “India is a very big country. There are retailers in every village and city. How many stores will open?” There is no escaping from this fact. According to the 2011 census, India has 45 cities with a population of over one million. With a total population of approximately 113 million in these cities, less than 10% of the country’s population is likely to be directly affected. Indeed, how many stores will be opened or can be opened?
The small sector is unlikely to remain unaffected if big retail chains enter the Indian market. But from the perspective of the Indian economy the gains to, or protection for, any particular group should be viewed in the context of losses or costs to the country as a whole. To the extent global retailers improve efficiency (for instance, through lower prices or less wastage via improved supply chain management), the cost of protecting the neighbourhood kiranas, or the