Welcome Walmart….!!! Effects of FDI in India
The government’s decision to liberalise FDI in multi brand retail is being seen as a bold move to attract foreign investments in India. But allowing global retail giants in the country may not bring in the promised dividends. The day when Prime Minister Manmohan Singh announced his government’s decision to allow 51% FDI in multi brand retail. Thus signaling a welcome for foreign super-market chains, – a Washington based newspaper carried a detailed story on how Wal-Mart- America’s Largest retail chain has been displacing nearby business.
The discussions and debates had already started on the pros and cons of FDI Liberalisation in retail and how it will play out in India. On one hand we have the congress government cheering the move as a big-band reforms and on the other hand we have the opposition party opposing to move as a big doom for the local kirana (grocery) stores and render a huge chuck of our population jobless. Some have even argued that the government’s hurried push for the reforms is only with an intention to divert the nation’s attention from the COAL SCAM, while some say these reforms comes in the wake of rapidly gathering perception about the government being stuck in policy paralysis.
The government is in no mood to withdraw its decision, so whether one likes it or not, FDI in retail is here to stay. The government’s defence that the move to allow FDI in multi-brand retail will fix some of its issues is simply a case of wishful thinking. A major barrier is the lack of back-end infrastructure in retail. Almost 40% of vegetables and fruits produced in the country are lost just due to poor storage facilities. As a result the prices to these commodities rises once they enter the retail market. COMMERCE MINISTER ANAND SHARMA had remarked in April this year that the price of Onion which is sod to traders at 92/kg jumps to 2818/kg by the time it reaches the end user. One of the major reasons for the hike in price is due to loss suffered during transporation and storage. Thus, it is crystal clear that vegetables and fruits will have longer shelf life only if cold storage facilities are in place and ofcourse in large number as well. But it is also interesting to know that despite rules allowing 100% FDI to set up cold storage facilities in India there have been no takers for such kind of investment. The reason why nobody has invested in setting up cold storage facilities is because they need lots of electricity and power supply. And you all very well know the supply of electricity in India…!! Thus, the assumption of government that retailers like Wal-Mart will invest in power is beyond beliefs. The fact is that no foreign investor is going to come and invest in transport, railways, roadways or in power.
The another assumption of government that the farmer will get a better price for his produce if FDI in retail is allowed is a baseless suggestion. Farmers need decent roads to connect them to the market. For government to believe that the retail gaints would invest in roads is like lining in fool’s paradise. The government also suggests that the poor consumers would benefit from low prices that supermarket will deliver, but these assumptions also dp not seem to be based on ground of relability. How many maid servants, rickshaw pullers, push cart vendors, auto drivers, taxi-drivers, constuction workers have been going to Big Bazar, D-Mart, Spencer etc..?? Will they visit Wal-Mart ? The fact that Wal-Mart spending crores on lobbing means nothing but only business in India. Despite the gray spots in policy, the Industry has by and large given it a thumbs up. The CEO of WAL-MART MIKEDUKE plans to roll out their retail multi-brand venture within next 12-18 months. One hopes that the foreign customs are able to take the retail industry to the next level of growth.