With the government’s decision to allow 51 per cent Foreign Direct Investment or FDI in the multi-brand retail sector, is the Indian retail scene set for a dramatic makeover? What does this mean for our burgeoning young workforce, Indian consumers and other major stakeholders?
According to CII, in a potential scenario, the opening up of FDI can increase the organised retail market size to US$ 260 billion by 2020. In Union Minister for Commerce and Industry, Anand Sharma’s view, this means that the sector will create 10 million new jobs, including 6 million in the logistics sector alone.
“We should ask why there should not be FDI in retail. In most countries, FDI is a way of contributing to additional employment. The more capital that comes in, the more institutions or shops and retail stores are established. So, you would need more people to run them,” says Shashi Tharoor, MP. Tharoor also explained that even those who are adversely affected initially would eventually recover, as had been the experience in various countries. As he explained, “what small shops can do, big shops can’t because small shops provide more personalised service.”
According to Richie Madan, executive director, Elixir Consulting, “The opening of retail for FDI will give a boost to the organised retail sector. Jobs will be created across levels — into front end and back end operations, store operations, merchandising, logistics and distributions, marketing, procurement/purchase and corporate services. It is a big positive step for our young workforce.”
There is no doubt that the gap between the Indian and the international retail experience is huge. This would result in wider choices for consumers with better competition. It would lead to the assurance of quality with greater transparency and the easier monitoring of adulteration, and counterfeit products.
“Foreign investments will bring in more competition and far more efficiency; it will create lakhs of new jobs and reduce the price gap at the levels of the farm gate, wholesale and retail,” says D.S. Rawat, secretary general of the Associated Chambers of Commerce and Industry of India. FDI in retail would also lower prices that could help curb inflation.
Vikram Singh, a student of retail management says, “FDI in any sector means a greater choice for consumers and huge investments for India, leading to jobs. In the past two decades, Indian consumers have experienced the best that sectors like telecom and IT have to offer thanks to these sectors opening up.”
Apart from the positive effect of the changing shopping experience, the entry of foreign supermarket players will create a supply chain management, know-how and technology. Farmers across India’s six lakh villages stand to gain from greater market access, higher profits, better technology and direct linkage with consumers. An Indian farmer currently loses anywhere between 30 and 40 per cent of his produce because of the lack of proper infrastructure.
Says Harlal Moond, a farmer from Majhau, in the district of Jhunjhunu, whose produce is directly purchased by a company that operates cash-and-carry stores, “We used to get very low returns by selling in the local mandi but direct purchase from farms has helped us immensely. There is no wastage and there are no middle men involved.”
Even the Twitter community is abuzz with supportive tweets. “As far as I’m concerned, opposition to FDI in retail is regressive and short-sighted,” tweeted Anand Mahindra of Mahindra & Mahindra.