FDI in retail refers to foreign investment in companies operating in the retail sector in another country. Allowing FDI in India's retail sector could provide benefits like new technologies and skills, jobs, and higher prices for farmers, but it may also displace many small shops and retailers. The document discusses views on both the pros and cons of FDI in India's retail sector, focusing on how it impacts farmers, small retailers, food prices and supply chain efficiency. It concludes that fears of small shops being displaced are exaggerated and farmers may benefit from more competitive retail options.
AGRICULTURAL VALUE CHAINS AND SMALLHOLDER PRODUCER RELATIONS IN THE CONTEXT O...ijmvsc
Access to regional markets by small scale producers remains a problem in Southern Africa, yet retailing is
becoming big business. A proliferation of supermarkets has been witnessed since the 1990s with South
Africa’s Shoprite supermarket becoming a major player in African markets. Supermarkets play a critical
role of food systems development in Southern Africa but theissues of concern pertain to how increased
aggregate value can be generated for agricultural produce whilst at the same time retaining more value
nationally/locally for smallholder agricultural producers. This paper focuses on small producers,
characterising food systems evolution in Southern Africa and highlighting how small producers are
relating with supermarkets. Drawing on existing empirical work to examine successful agribusiness
initiatives for smallholder farmers in Africa in accessing regional value chains, the paper argues that
ineffective regional policies contribute to forces preventing upgrading of smallholder farmers into regional
markets. An analysis that synthesises various emerging issues regarding the relations between
supermarkets and small producers is presented to inform research themes for uptake into policy
formulation.
Fast-moving consumer goods (FMCG) or consumer packaged goods (CPG) are products that are sold quickly and at relatively low cost. Examples include non-durable goods such as packaged foods, beverages, toiletries, over-the-counter drugs and many other consumables.
AGRICULTURAL VALUE CHAINS AND SMALLHOLDER PRODUCER RELATIONS IN THE CONTEXT O...ijmvsc
Access to regional markets by small scale producers remains a problem in Southern Africa, yet retailing is
becoming big business. A proliferation of supermarkets has been witnessed since the 1990s with South
Africa’s Shoprite supermarket becoming a major player in African markets. Supermarkets play a critical
role of food systems development in Southern Africa but theissues of concern pertain to how increased
aggregate value can be generated for agricultural produce whilst at the same time retaining more value
nationally/locally for smallholder agricultural producers. This paper focuses on small producers,
characterising food systems evolution in Southern Africa and highlighting how small producers are
relating with supermarkets. Drawing on existing empirical work to examine successful agribusiness
initiatives for smallholder farmers in Africa in accessing regional value chains, the paper argues that
ineffective regional policies contribute to forces preventing upgrading of smallholder farmers into regional
markets. An analysis that synthesises various emerging issues regarding the relations between
supermarkets and small producers is presented to inform research themes for uptake into policy
formulation.
Fast-moving consumer goods (FMCG) or consumer packaged goods (CPG) are products that are sold quickly and at relatively low cost. Examples include non-durable goods such as packaged foods, beverages, toiletries, over-the-counter drugs and many other consumables.
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FMCG is the fourth largest sector in the Indian economy
Household and Personal Care is the leading segment, accounting for 50 per cent of the overall market. Hair care (23 percent) and Food & Beverages (19 per cent) comes next in terms of market share
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3. Possible Views
FDI refers to the net inflows of investment (inflow minus
outflow) in an enterprise operating in an economy other than
that of the investor. It usually involves participation in
management, joint-venture, transfer of technology and expertise.
It brings private funds from overseas into products or services.
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5. Company’s Point
• Why any companies wishes for FDI when decide of going global?
• Circumventing trade barriers, hidden and otherwise
• Making the move from domestic export sales to a locally-based national sales office
• Capability to increase total production capacity
• Opportunities for co-production, joint ventures with local partners, joint marketing
arrangements, licensing, etc
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6. Host Nation
For a host country or the foreign firm which receives the investment, it can
provide a source of new technologies, capital, processes, products,
organizational technologies and management skills.
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7. Retail Sector in India
• Vast, huge potential for development, majority of its constituents are un-
organized
• Contributes about 15% to the GDP, employs a massive workforce following
agriculture
• Organized retail sector’s expected growth rate is 15-20% per year
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9. FDI in Retail
• Single Brand Retail
• Multi Brand Retail
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10. FDI in Retail
• Until 2011,Central Government denied FDI in multi-brand retail, forbidding
foreign groups from any ownership in supermarkets, convenience stores or
any retail outlets.
• Even single-brand retail was limited to 51% ownership and a bureaucratic
process.
• In November 2011, India's central government announced retail reforms for
both multi-brand stores and single-brand stores.
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11. FDI in Retail
• In December 2011, Indian government placed the retail reforms on hold till it
reached a consensus.
• In January 2012, India approved reforms for single-brand stores welcoming anyone
in the world to innovate in Indian retail market with 100% ownership, but imposed
the requirement that the single brand retailer source 30% of its goods from India.
• In 14 Sepetember 2012, Cabinet approved FDI upto 51% in multi-brand retail,
along with a slew of economic reforms, subject to many riders. This move has led
to the political situation heating upto a boiling point, with TMC having withdrawn
support from the government.
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13. Pros
Benefit to Farmers:
• 7-10% higher price to farmers than what they get from Mandi
• Expert advice on better crop planning and management
• Efficient crop calendar management aimed at catching early and late seasons
for better prices
• Opportunity to maximize and improve income by offering better quality
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14. Pros
• Huge investments will see gainful employment opportunities in agro-
processing, sorting, marketing, logistics management and front-end retail
• At least 10 million jobs will be created in next three year in the sector(As per
GoI)
• Will help farmers secure remunerative prices by eliminating exploitative
middlemen
• Foreign retail majors will ensure effective supply-chain efficiencies, it will also
create an opportunity for the local players to learn from them
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15. Pros
• Policy mandates a minimum investment of $100 million with at least half the
amount to be invested in back-end infrastructure, including cold chains,
refrigeration, transportation, packing, sorting and processing
• Will have a impact on food inflation from efficiencies in supply chain
• Sourcing of a minimum of 30% from Indian micro and small industry will
encourage domestic value addition and manufacturing
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16. Pros
Benefit to stores & customers:
• Fresh produce
• Local source
• Consistent quality
• Safer food
• Value for money
• Lower cost compared to open market buys
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17. Cons
• Move will lead to large-scale job losses
• International experience shows supermarkets invariably displace small retailers
• Small retail has virtually been wiped out in developed countries like the US and in
Europe. South East Asian countries had to impose stringent zoning and licensing
regulations to restrict growth of supermarkets after small retailers were getting
displaced
• India has the highest shopping density in the world with 11 shops per 1,000 people
• It has 1.2 crore shops employing over 4 crore people; 95% of these are small shops
run by self-employed people
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19. Conclusion
• Fears of small shopkeepers getting displaced are vastly exaggerated
• Mega retail chains need to keep price points low and attractive
• The argument that farmers will suffer once global retail has developed a
virtual monopoly is also weak.
• Secondly, it can't be anyone's case that farmers are getting a good deal right
now. The fact is that farmers barely subsist while middlemen take the cream
1/16/2016 19
The government made a decision to allow foreign direct investment from abroad of up to 51 percent in multi-brand supermarkets, up to 49 percent in aviation, up to 71 percent in broadcasting and up to 49 percent in parts of the power industry.
A major argument given by opponents of FDI in retail is that there will be major job losses. Big retail chains are actually going to hire a lot of people. So, in the short run, there will be a spurt in jobs. Eventually, there's likely to be a redistribution of jobs with some drying up (like that of middlemen) and some new ones sprouting up.
To begin with, it's very unlikely that global retail will ever become monopolies. Stores like Wal-Mart or Tesco are by definition few, on the outskirts of cities (to keep real estate costs low), and can't intrude into the territory of local kiranas. So, how will they gobble up the local guy?