Retail trade contributes around 10-11% of India’s GDP and currently employs over 4 crore people. unorganized retailing accounts for 96% of the total retail trade. Traditional forms of low-cost retail trade, from the owner operated local shops and general stores to the handcart and pavement vendors together form the bulk of this sector. McKinsey Report on ‘Indian Growth’ projects an addition of 71 lakhs jobs in the retail sector between 2000 to 2010 with the modern format retailers (e.g. supermarkets) accounting for 8 lakhs jobs UNDERSTANDING INDIAN RETAIL SEGMENT
Foreign Direct Investment (FDI) is not permitted in retail trade except in single Brand product retailing where Foreign Investment up to 51% is permitted with prior Government approval and subject to the following conditions: 1. Products to be sold should be of ‘Single Brand’ only 2. Products should be sold under the same brand internationally and 3. ‘Single brand product-retailing would cover only products which are branded during manufacturing .
Government’s Justifications for supporting FDI in Retail ► 1 Inflation will be controlled. ► 2 Employment will be created ► 3 Complete Tax benefits from organized retail sector ► 4 Farmer will be benefited as middle-man/agent will be eradicated ► 5 Consumer will be benefited out of competition ► 6 Inspiration from Chinese open market strategies ► 7 Target Figures in Foreign Direct Invest will achieve. ► 8 Export of Indian product will rise. ► 9 SME will grow ► 10 India will shine Globally
1. Inflation will be controlled. ► Government incapable to control inflation themselves ? ► Do we need Foreign companies to solve our National problem ? ► Our Finance ministry incapable ? ► Is it why commodity prices are on rise ?
On India’s last Independence day China Charges Fines to Carrefour, Wal-Mart for Deceptive Pricing The Chinese government accused Carrefour SA and Wal-Mart Stores Inc. of deceptive pricing at their store in the country, ordering local authorities to impose fines. The National Development and Reform Commission said Wednesday that it found misleading pricing at 11 Carrefour stores and three Wal-Mart stores. The commission also alleged such practices at a branch of a Chinese supermarket chain. The agency's statement came amid heightened concern over pricing as China battles inflation. China's consumer-price index rose 4.6% last month, after reaching a two-year high of 5.1% in November. The commission said the stores misled shoppers by claiming that the original prices on discounted items were higher than they actually were, making the discounts seem greater, or by charging customers more at the register than the prices on labels or in advertisements. ► We trust these MNC Retailers for inflation control ?
2. Employment will be created. ► 20 lack jobs will be created on the cost of 5 caror self employed local shop keepers ? ► Retail trade being an easy business to enter with low capital and infrastructure needs, acts as a kind of social security net for the unemployed ► Government cant create Jobs in new sector ?
3. Complete Tax benefits from organized retail sector ► Government cant make effective method to collect tax for current system ? ► Just to collect Tax effectively, is it justifiable to kill established small scale traders ?
4. Farmer will be benefited as middle-man and agents will be eradicated. ► If they serve the competitive price to consumer, MNC will have to import goods from cheapest market of the world, does this protect local supplier or farmer ? either they can serve consumer or they can serve supplier. ► Does it match the farmers expectations in terms of volume, quality and delivery.” ? ► Will farmer have to face problems related to depressed prices due to cutthroat competition among the food retailers, delayed payments and lack of credit and Insurance. ? ► Why cant we make strong laws to support farmers to protect them from local traders ?
5. Consumer will be benefited out of competition. ► The ability of the multinational retail chains to sell at low prices is often attributed to their “efficiency” in sourcing goods from their lowest cost producers around the world. What underlies this so-called “efficiency” or “cost reduction through better inventory and cost management” is the ability of these retail chains to squeeze producers across the globe using their monophony power. ► If these retailers are to sell goods to Indian consumers at prices, which are cheaper than what prevails today while sourcing their goods from Indian producers, the latter are definitely going to be at the receiving end in terms of declining incomes. ► In case the multinational retailers import the cheaper goods from abroad, domestic producers would be displaced anyway. It is difficult to understand therefore how the domestic producers would benefit from these multinational retailers. ► cocoa farmer from Ghana gets only about 4% of the price of a typical milk-chocolate bar, the retail margin would be around 34.1%. Banana producer gets around 5% of the final price of a banana while over 34% accrues to distribution and retail. 54% of the final price of a pair of jeans goes to the retailers while the manufacturing worker gets around 12%.
6. Inspiration Chinese open market strategies ► 60% products in world wide MNC Retail stores are made in china. ► China is manufacturing hub of the world, when they sale it to world, they have to open there own market too. ► Do we stand in global manufacturing index anywhere?
7. Target Figures in Foreign Direct Invest will increase . ► Does FDI in retail bring any innovative technology ? ► Does FDI in retail bring any solution to environment ? ► Does FDI in retail bring any up-gradation to infrastructure ? ► Does FDI in retail bring any fuel and power generation technology ? ► We not capable to Retail store construction technology, Logistic system development or Computer technology used in modern retail ? ► Our own corporate houses cant manage domestic retail segment ?
8. Export of Indian product will rise. ► Our manufacturing industry competitive to Chinese prices ? ► Our quality will sustain against credit payment system ? ► How These MNC Retailers force to WTO and developed countries to change dumping laws ?
SME will grow
► 60,000 articles in wall mart. 70% of them are made in china.
How many made in India articles sold in any MNC retail world wide ?
► In India 25000 different articles are made by below communities who have only scope of the self employment by producing SME articles and selling it
► Will they sustain against Chinese quality, quantity and price ?
India will shine Globally
► Big MNC building in metro city with the lane of beggars and job seekers would be the shining evidence globally ?
FDI in RETAIL Who will affect ► Indian Production house against Chinese dumping ► Small scale sector ► Small and Large KINARA stores ► SME Fabricators ► Indian traders in each town ► Local business man, who want to run a small shop ► All associated with Swadesi promotion movement
Our proposal if Government impose Retail FDI ► Heavy duty on Chinese and other imported product to protect domestic production. No import license to these retail corporate ► Must import the equal quality of goods made in by “ Indian production house” ► No foreign management Jobs outsourcing ► Reservation of Job to poor class ► Hindi and Other Regional language as the language of operation ► Retail company can’t produce their own packed goods ► Must promote and allocate atleast 30 % space for swadesi product. ► Mall will locate outside city, like cosmopolitan cities. ► FDI should be allowed in a relatively less sensitive sectors like entertainment, technological goods, "
Hide n Seek supporting FDI in Retail. ► Capitalist and hungry corporate business who want to expand fast ► Young Management graduates hoping scope of JOBs ► Will corrupt politicians get Direct Bribes easily? ► Will their kids get good shopping environment? ► Will the rich people get foreign quality good? ► Media and celebrities who will get ads champagne
Evil of Global Retail culture ► Brand Monopoly ► Centralized product sourcing and logistic. ► Import Dumping. ► Rise of electrical and fuel consumption due to large logistic utility. ► Profit oriented Foreign Management. ► Credit and payment issues to vendors ► only profit ethics advertisements
Illusion of Development ► FDI in retail don’t bring Technology. ► Logistic system will consume more fuel and waste electricity. ► Liberalization of trade policies led India to become an investment friendly country is an illusion ► 70% Farmer get benefited ? How ? The current prices in agricultural commodity in established retail is more than local Kinara shop. ► Consumer get benefited. The current MRP of mall product is more than street shop ► Quality norm of MNCs will affect the average wholesale price. Will Indian companies capable to survive against wallmart-carrfour-tesco ? ► FDI in retail is Greenfield FDI in manufacturing Technology ? ► Does it develop infrastructure , does it generate power or fuel ?
Why Foreign Investment Large Indian Business Group already have established this sector Future Group, Reliance, Tata, Aditya Birla, RPG, Vishal Group, Pyramid. Shopper's Stop, Pantaloon, Subhiksha, Globus, Raymond, Titan…. Why we need Foreign Investments. ? India does have any prior commitments vis-à-vis the WTO to open up the retail sector. ?