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BW Businessworld

Retail FDI: Still Sitting On The Fence

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The Union minister for commerce Nirmala Sitharaman has reiterated that the current Government is still opposed to Foreign Direct Investment (FDI), in the retail sector, and its stand on the issue is same as it was when they were in the opposition. 
 
However, there have been mixed signals coming from the government, as it is still sitting on the fence, and not framing laws that stop investments from coming in. 
 
There are positive arguments in favour of going forward with this initiative.
 
For instance, the role of middlemen has always been a controversial one. They have been accused and often with good reasons of exploiting the farmers, and reaping a major chunk of the price which the farmers have a right on. There is this theory that this problem will be minimized once FDI is introduced in this sector.
 
Companies investing in India will open infrastructure like the transportation and the storage facilities which still plagues a major part of the country. This will be reflected in the inflation rate, since it is expected to decline.
 
Creation of jobs will witness a growth, as has been witnessed in countries like China, Thailand, Philippines and Malaysia where a 100 per cent FDI has seen a rapid growth in the processing, packaging, and marketing and also in many cases manufacturing.
However, India is a unique market, and there are voices and concerns that should also be monitored and taken into account.
 
The small ‘Kirana store’ at the corner of the street will receive a major setback, and will suffer losses, as people looking for more profits, sales and better comfort will make a beeline for retailers like Wal-Mart.
 
As described these retailers will fine tune the costs, and they will offer products at lower prices, thus slowly killing the scope of small retailers.
 
There is also a concern that inspite of the ‘Make in India’ campaign, how many of these giant retailers will actually look towards manufacturers from India, as they will already have their own sources elsewhere. Jobs might just get affected.
 
India is home to a more fragmented market, and they appear to cater to the needs of the population better than consolidated market.
 
There are always two sides of the coins, but then neither the advantages of this move, nor the demerits can be entirely ruled out.
 
 A proper blueprint has to be prepared by the Government if they are mulling the idea of FDI in retail sector, and reservations will have to be made for the farmers, since the last person standing in a queue is equally entitled to receive the benefits that come through.