~: FDI in Retail: A Pragmatic Move by the Government: ~
The Opposition Parties' holding the Parliament Sessions, at Ransom, is Farcical, Ridiculous and Hilarious. It needs condemnation from all the sane people.....
The Opposition Parties' holding the Parliament Sessions, at Ransom, is Farcical, Ridiculous and Hilarious. It needs condemnation from all the sane people.....
After Dr.Amit Mitra, donned the hat of Finance Minister of West Bengal or Bangla, I thought a new dawn will user in West Bengal, but how mistaken I was in this regard as TMC joined the BJP, in their opposition to the government's move to grant FDI in the retail sector. It seems after assuming the chair, Dr.Mitra is simply parroting the lines of his Leftist predecessors. I have always adored Dr.Mitra for his non partisan and progressive views from the time I know him, but this time I am disappointed by his parochial attitude---so sorry to see his wings being clipped by the TMC leadership. Anyway, let us now deal with the straightway.
The government on Thursday approved 51% foreign direct investment (FDI) in supermarkets, paving the way for firms such as Wal-Mart Stores Inc, Tesco and Carrefour to enter one of the world's largest untapped. According to media reports, the retail business is worth Rs. 400 billion USD in India and is growing at an annual rate of only 13%; which needs to be revamped with the external factors.
However, there is an attempt to over generalize the things, regarding FDI in the retail sector. Almost similar huge and cry were raised when the FDI was announced in the real estate sector some years back. However, we find that as per World Investment Report, 2008, India is the 2nd most attractive destination for the years 2009-2010.
Now, let me explain a bit about the Indian Retail Business briefly. People buy from local Kirana houses or Retail shops which are nearer to their homes or which give them discounts or both. Besides, the customers normally do not change the "Kirana" shops, because of the trust or faith in the owner. Similar is the case for your hair trimming saloon or your local "Mithai Walla"--we tend to go to the same place again and again. This is called behavioral economics----which is taking the world by a storm. At present the organized retail is only 2% of the total retail verticals in India--this implies that Indians still stick to their local Kirana houses in large amounts for their monthly purchases.This behavioral pattern is the thin wafer between divorce and happily married life. Similar is the brand loyalty. I for instance, do not use any toothpaste except Colgate since the last 2 decades, unless it is by force. Similar is your food habits, clothing living standards.
Moreover, the local shops have low running costs and at the same time they maintain a friendly relationship with the customers---sometimes delivering goods to their homes. Hence, it would be totally out of sync to assume that because the Foreign Multinationals will come, the mom and pop stores will close down.
This is in fact an absurd proposition!! The days of East India Company are gone.....!! We are living in a globalized world where the man made boundaries/borders are slowly fading away. Look at Europe--the countries which fought each other during the World War are now having a common currency, Euro and a bank, ECB. How strange isn't it? The times are changing and hence we cannot float in static ideas in a ventilation free room.
We need to be fast and steady. The days of hare and tortoise are now to be found only in history books.
Besides, this the Organised Retail has never taken India by storm. My point is pegged on the fact that many of the reputed Indian retail chains are running huge debts. Pantaloon Retail had a debt of over Rs.4,000 crore as of June. Koutons Retail and Vishal Retail too have debts of around Rs.700 crore each. The same condition is with Goenka's, Spencers Retail. The Reliance Retail is also not doing well. The two of soft drink multinationals, Pepsi and Coca Cola are steeped in huge debt burden. Hence, it will not be prudent to assume that, entry of the multinational will sound death knell to the domestic companies.
On the other hand, the domestic retail players who provide jobs for millions are strangulated by piling debts and who need immediate capital infusion for their survival or to prevent further retrenchment in these companies.
The research firm, CRISIL Research today said: "Permitting foreign direct investment in multi-brand retail will attract foreign investments of about $ 3 billion over the next five years". So, where will this money go? Into India only. Isn't it?
If you have studied basics of economics you would find that, it is said, "One man's income is other man's expenditure". Hence, if retail companies spend to set up infrastructure, that will create jobs for Indians only. This will have a positive rub off effects among the other sectors too like Real Estate, Steel, Power, Cement, etc. Moreover, FDI-funded stores will have to mandatorily source 30% of their total procurement from Indian SMEs. Also, it is not obligatory for states to have FDI-funded retail stores. So, where is the danger?
Meanwhile, while FICCI has extended an all-out support to the government, CII, on the other hand, said while it "strongly supports the introduction of FDI in multi-brand retail trading, it recommends a calibrated approach for introducing FDI in the retail sector in terms of the percentage and minimum capitalization requirements". FICCI Secretary General Rajiv Kumar said opening of the retail sector would create big employment opportunities in the country. Kumar said the associations which are raising concerns that global retail chains like Walmart and Tesco would wipe out mom-and-pop stores are following a "politically motivated argument". "In fact, foreign stores will generate employment and that will be higher quality employment. Small stores would also increase their employment to compete with the big retailers," he said.
This is also, expected to precipitate joint ventures between Indian and foreign organized retailers giving us one of the world class products at reasonable rates.
The analysts feel the move will benefit Pantaloon the most as it will help trim debt and enable it to continue expansion. It will also help Tata’s retail venture Trent as it has and continues to seek tie ups with global retailers who are eagerly waiting to enter India. Other companies like Reliance Retail, CESC , which owns the retail chain Spencers, Aditya Birla Retail and Koutons among others too stand to gain.
Angel Broking estimates India’s organised retail market to be worth USD 28 billion at present and sees it nine-times bigger by 2020. Edelweiss Securities says share of modern retail for consumer companies will jump to over 20% by 2020 from current 8%. SO WHO WILL BE BENEFITED? It is the Indians only. Isn't it?
Now let me point out other facts too: about 5-6 million of the 8 million FMCG-stocking kiranas are placed in rural India, and are totally safe, as the new ones can only come into the top 53 cities. Since we need specialists in every field, what is the point of having, numerous retail counters, with meager income for the people, than having a large shop which will generate employment for the young people.
Many children of small-time "Kirana" stores are now getting better educated and want to exit this profession of "sitting in the shop" as soon as possible, just as small farmers' children are exiting farming. Sadly, the country's retail density has been increasing in recent years, not driven by passion or profit, but because of lack of options or unemployment- hopefully this is expected to change in the coming days, if those shops are not able to cut down on the cost and maintain some form of bonds with the customers.
Rama Bijapurkar, writes: It is true that traditional income streams of small shops in the vicinity of a large supermarket plummet; but we have seen that they soon recast their business model, exploiting the inherent advantages they have that the supermarket cannot emulate: free, prompt and no-conditions home delivery, superior and customized customer relationship management, khaata credit and willingness to stock small quantities of something used by only a few people in their catchment - a classic 'long-tail' strategy.
Further, foreign specialty retailers targeting the rich consumer will create never-before custom, and not at the expense of existing shops. Two decades ago, after the Indian economy was opened, we had the same hue and cry that Indian brands would be wiped out; but they got better and bigger than they would have had they been left unchallenged.
The point is that in the increased globalized environment we cannot remain satisfied using, Carefree or Whisper brands of sanitary napkins to make ladies feel comfortable during the time of periods but we should look for more better and cheaper products in a given time.
This is only possible if the Indian companies go for strategic alliances with the global giants. Simply, closing our eyes to the happenings of the world might not serve the purpose in the 21st century, infested with dog-eat-dog, competitive market. Opening up of foreign store does guarantee one thing – stiffer competition and aggressive pricing and better quality of service...India needs efficient supply chain management to save or preserve thousands of tonnes of food grains which rot due to lac of storage. The BJP-led opposition asking the Congress-led UPA to roll back its contentious decision to allow 51 percent FDI in multi-brand retail should taken note of the above facts and allow the Parliament to function normally. No business has been conducted in both houses after the beginning of the winter session on November 22. It is estimated that over the last six days nearly Rs.6.5 crore worth of public money has been wasted due to the logjam in Parliament. The Tax Payers hard earned money is being mis-used for taking up the so-called cause, which allegedly affect only 40 million Indians, which is not even 5% of the Indian Population---what can be more ridiculous!! How can the BJP-led opposition deny the best things at reasonable prices, to the 95% of the Indian population at the cost of less than 5% of the Indian population---Is it "Political Mastani" or "Political Brinkmanship" or Simply "Vote Bank Politics"....??!! We can however, enjoy the 24x7 circus (in the comforts of our bedroom) being enacted on the Parliament floor by these so called agents of people. Where will we get such "Comical Parliament Sessions" except India??!!
However, there is an attempt to over generalize the things, regarding FDI in the retail sector. Almost similar huge and cry were raised when the FDI was announced in the real estate sector some years back. However, we find that as per World Investment Report, 2008, India is the 2nd most attractive destination for the years 2009-2010.
Now, let me explain a bit about the Indian Retail Business briefly. People buy from local Kirana houses or Retail shops which are nearer to their homes or which give them discounts or both. Besides, the customers normally do not change the "Kirana" shops, because of the trust or faith in the owner. Similar is the case for your hair trimming saloon or your local "Mithai Walla"--we tend to go to the same place again and again. This is called behavioral economics----which is taking the world by a storm. At present the organized retail is only 2% of the total retail verticals in India--this implies that Indians still stick to their local Kirana houses in large amounts for their monthly purchases.This behavioral pattern is the thin wafer between divorce and happily married life. Similar is the brand loyalty. I for instance, do not use any toothpaste except Colgate since the last 2 decades, unless it is by force. Similar is your food habits, clothing living standards.
Moreover, the local shops have low running costs and at the same time they maintain a friendly relationship with the customers---sometimes delivering goods to their homes. Hence, it would be totally out of sync to assume that because the Foreign Multinationals will come, the mom and pop stores will close down.
This is in fact an absurd proposition!! The days of East India Company are gone.....!! We are living in a globalized world where the man made boundaries/borders are slowly fading away. Look at Europe--the countries which fought each other during the World War are now having a common currency, Euro and a bank, ECB. How strange isn't it? The times are changing and hence we cannot float in static ideas in a ventilation free room.
We need to be fast and steady. The days of hare and tortoise are now to be found only in history books.
Besides, this the Organised Retail has never taken India by storm. My point is pegged on the fact that many of the reputed Indian retail chains are running huge debts. Pantaloon Retail had a debt of over Rs.4,000 crore as of June. Koutons Retail and Vishal Retail too have debts of around Rs.700 crore each. The same condition is with Goenka's, Spencers Retail. The Reliance Retail is also not doing well. The two of soft drink multinationals, Pepsi and Coca Cola are steeped in huge debt burden. Hence, it will not be prudent to assume that, entry of the multinational will sound death knell to the domestic companies.
On the other hand, the domestic retail players who provide jobs for millions are strangulated by piling debts and who need immediate capital infusion for their survival or to prevent further retrenchment in these companies.
The research firm, CRISIL Research today said: "Permitting foreign direct investment in multi-brand retail will attract foreign investments of about $ 3 billion over the next five years". So, where will this money go? Into India only. Isn't it?
If you have studied basics of economics you would find that, it is said, "One man's income is other man's expenditure". Hence, if retail companies spend to set up infrastructure, that will create jobs for Indians only. This will have a positive rub off effects among the other sectors too like Real Estate, Steel, Power, Cement, etc. Moreover, FDI-funded stores will have to mandatorily source 30% of their total procurement from Indian SMEs. Also, it is not obligatory for states to have FDI-funded retail stores. So, where is the danger?
Meanwhile, while FICCI has extended an all-out support to the government, CII, on the other hand, said while it "strongly supports the introduction of FDI in multi-brand retail trading, it recommends a calibrated approach for introducing FDI in the retail sector in terms of the percentage and minimum capitalization requirements". FICCI Secretary General Rajiv Kumar said opening of the retail sector would create big employment opportunities in the country. Kumar said the associations which are raising concerns that global retail chains like Walmart and Tesco would wipe out mom-and-pop stores are following a "politically motivated argument". "In fact, foreign stores will generate employment and that will be higher quality employment. Small stores would also increase their employment to compete with the big retailers," he said.
This is also, expected to precipitate joint ventures between Indian and foreign organized retailers giving us one of the world class products at reasonable rates.
The analysts feel the move will benefit Pantaloon the most as it will help trim debt and enable it to continue expansion. It will also help Tata’s retail venture Trent as it has and continues to seek tie ups with global retailers who are eagerly waiting to enter India. Other companies like Reliance Retail, CESC , which owns the retail chain Spencers, Aditya Birla Retail and Koutons among others too stand to gain.
Angel Broking estimates India’s organised retail market to be worth USD 28 billion at present and sees it nine-times bigger by 2020. Edelweiss Securities says share of modern retail for consumer companies will jump to over 20% by 2020 from current 8%. SO WHO WILL BE BENEFITED? It is the Indians only. Isn't it?
Now let me point out other facts too: about 5-6 million of the 8 million FMCG-stocking kiranas are placed in rural India, and are totally safe, as the new ones can only come into the top 53 cities. Since we need specialists in every field, what is the point of having, numerous retail counters, with meager income for the people, than having a large shop which will generate employment for the young people.
Many children of small-time "Kirana" stores are now getting better educated and want to exit this profession of "sitting in the shop" as soon as possible, just as small farmers' children are exiting farming. Sadly, the country's retail density has been increasing in recent years, not driven by passion or profit, but because of lack of options or unemployment- hopefully this is expected to change in the coming days, if those shops are not able to cut down on the cost and maintain some form of bonds with the customers.
Rama Bijapurkar, writes: It is true that traditional income streams of small shops in the vicinity of a large supermarket plummet; but we have seen that they soon recast their business model, exploiting the inherent advantages they have that the supermarket cannot emulate: free, prompt and no-conditions home delivery, superior and customized customer relationship management, khaata credit and willingness to stock small quantities of something used by only a few people in their catchment - a classic 'long-tail' strategy.
Further, foreign specialty retailers targeting the rich consumer will create never-before custom, and not at the expense of existing shops. Two decades ago, after the Indian economy was opened, we had the same hue and cry that Indian brands would be wiped out; but they got better and bigger than they would have had they been left unchallenged.
The point is that in the increased globalized environment we cannot remain satisfied using, Carefree or Whisper brands of sanitary napkins to make ladies feel comfortable during the time of periods but we should look for more better and cheaper products in a given time.
This is only possible if the Indian companies go for strategic alliances with the global giants. Simply, closing our eyes to the happenings of the world might not serve the purpose in the 21st century, infested with dog-eat-dog, competitive market. Opening up of foreign store does guarantee one thing – stiffer competition and aggressive pricing and better quality of service...India needs efficient supply chain management to save or preserve thousands of tonnes of food grains which rot due to lac of storage. The BJP-led opposition asking the Congress-led UPA to roll back its contentious decision to allow 51 percent FDI in multi-brand retail should taken note of the above facts and allow the Parliament to function normally. No business has been conducted in both houses after the beginning of the winter session on November 22. It is estimated that over the last six days nearly Rs.6.5 crore worth of public money has been wasted due to the logjam in Parliament. The Tax Payers hard earned money is being mis-used for taking up the so-called cause, which allegedly affect only 40 million Indians, which is not even 5% of the Indian Population---what can be more ridiculous!! How can the BJP-led opposition deny the best things at reasonable prices, to the 95% of the Indian population at the cost of less than 5% of the Indian population---Is it "Political Mastani" or "Political Brinkmanship" or Simply "Vote Bank Politics"....??!! We can however, enjoy the 24x7 circus (in the comforts of our bedroom) being enacted on the Parliament floor by these so called agents of people. Where will we get such "Comical Parliament Sessions" except India??!!
CAN WE CALL IT BEDROOM FARCE.....??!!........Lol....
Sources:
(i) www.economictimes.com
(i) www.economictimes.com
(ii) www.moneycontrol.com
(iii) www.firstpost.com
(iv) http://bbpmlaw.com
(v) www.ibtl.in
.jpeg)
Comments