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Checks and Balance for FDI in retail Pl contribute guys

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umesh derebail
from Mumbai |

I believe the govt is planning a introduce a bill in Parliament to allow FDI in multi brand and single brand in Retail or Hyper Market.  The opposition has been stalling it in the name of indigination, competition and killing mom and pop stores.  But it will be eventually allowed into the country but what are real checks and balances to be undertaken.  I am enumerating a few of them below :

1.  Employees direct should be 2 lakhs and above for multibrand under the roll of the company out of which 70% should be Indians.  50 k in case of single brand.

2.  Sourcing of domestic products and services should be 60% of the turnover.

3.  No winding up operations in less than a decade, listing on Indian bourses.

4.  All essential day to day consumption products should not be sold above 50% of the cost to the organisation to consumers.

5.  Eco friendly practices, and internationally banned products should not be palmed off to Indian consumers.

Guys these are some vital points i could juggle up to safegaurd domestic interest.  Pl pen your inputs in case you all are in favour of FDI in retail

Replies 1 to 10 of 10

Hemal Shah
from Mumbai |

I am sure none of what you listed will be implemented! even today, India is a Dumping ground for Chinese goods. I bought a Laptop from a reputed company and my friend too bought one, from the same brand and same model, going to the extent getting the same color... in all we have two exactly similar laptops.. but the only difference was I bought from India and he bought from US and both the laptops had different quality of material of processing and speed even though we had even the same configuration. we could make out which laptop was from India... 

And about FDI, I dont think it should be allowed. Why, should we allow FDI when Indians can invest in the company? Yea, there has to be a free business environment in India and I am thinking far from it. India's domestic market is so so strong that India could never be affected by the recession. ITs because of this increased globalisation, our markets are being more exposed. I am not a Leftist or a communist/socialist, but thinking from the angle of allowing foreign companies take stake in our companies would not do good in long term.

I like the way you have put in restrictions and these would ideally appear as a hinderance. and that is exactly why I don thtink government is going to keep any restrictions similar to what you stated.

umesh derebail
from Mumbai |

The Big B of Indian retail is welcoming the move of FDI in Indian retail, i am against FDI in existing Indian Retail formats.  They should essentially start up on their own rather than taking stakes and taking over existing Indian retail groups, it would be a real tragedy.  Either they go bust and existing players can take over their business at rock bottom prices or they succeed and give existing players run for their money.

Hemal Shah
from Mumbai |

thats exactly my point and i complete agree with you. to your point ,they should come and create a new business here. rather than acquiring a set of preset businesses

The Sorcerer
from Mumbai |

There are even more difference. Ratings of the capacitors, Japanese solid capacitors Vs. Chinese sealed/electrolytic capacitors, lesser PCB layers, no Keyboard tray within the notebook on many mid-end H/W- hence keyboard keys in the middle flex a bit. Don't even get me started on the framework and body of the notebook. I don't get notebook for reviews, maybe because I would probably open them up and strip them to find even more possible issues :P. Then again, a lot of media guys mishandle notebooks :(. Seen many notebooks, even expensive desktop replacement/gaming notebooks smashed, cracked and damaged beyond repair. I have a system infront of me where the case itself cost 16k (entire rig about 1.50 lakh) with everything damaged, both side panels destoryed, 2000mhz memory kits came off, memory cooler ripped apart, blu ray drive ripped off from the case and pushed in- and I think the slide rail for left side snapped off. Rest are minor dents, colour damage and broken acrylic sidepanel. Indian brands are way worse. They buy chinese notebooks/netbooks/tablets in bulk and they do nothing more than put their company's name on the product and design their own packaging. FDI will make it far worse.

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I don't want these malls like FRYs and all here, even though they would benefit an individual. In India we don't have a strong law to prevent companies taking advantage of consumers. A significant amount of population's livelihood depends on retail. They are small down-to-earth no bullshit stores. They can invest in small stores or chain of small stores if they want to, but putting up malls in established small business area is an obvious sign that they want to bring down the local small business. There was a time the local guys wanted to put this metro bridge through linking road- and they wanted amarsons and an old parsi house to vacate the place to put a station. All tricks by corporates to destroy small business. That's the real reason to FDI. So much economy problem so the only way that they can earn is by establishing themselves as mega retails in an established retail locations. Force them to shut down stores by pulling customers and making them to end up in a situation that these people would work for them. Look at United States, major urban population works for corporates, and even if they want to object something unethical, they fear about their jobs. Never give too much control to these private companies. Allow FDI only in industries where business run by common people doesn't exists and wont affect others directly or indirectly- like airways, cars, massive infrastructure...

RioZee
from Out of this yEt in this World |

I don't think many companies will be coming up in India seeing the constraints. Now see the recent plunges in stock markets, FII's
sellings and taking away us$, their gains all going down the drain in the weakening rupee.

Hemal Shah
from Mumbai |

Very true Pramod! a week Rupee wont certainly help them from gains prespective right now, but investment right now will be a high point you see, for less $ they will get more rupeee. 

umesh derebail
from Mumbai |

Pramod the logic of stock market is that it should go down and rise up, only than an investor makes money or loose money.  This is the fundamental principal of stock market, and only surplus or affordable investment should be on stock market.  It is the cyclical nature of the market that helps, one has to be extremely patient.  Rupee going down is also part of the cycle.  

RioZee
from Out of this yEt in this World |

One lac seventy thousand cr. Of money has evaporated frm the stock market. Now see the plight of banks which financed on promoters scripts.

Ram A Singh
from Silvassa |

Government is not investing they are busy in their chair saving, RBI is only know the way to control the inflation is keep increasing interest rate , then for development from  where fund will come. I think FDI is better option compare to FII. if we want to keep the pace of development going FDI is must because government is having money only for loot through MNREGA.

umesh derebail
from Mumbai |

Ram Singh, it is a misnomer that RBI is able to contain inflation, it is unable to do so, since black marketers are thriving with their godowns full to the brim.  This is where Retail formats should be made to reveal their inventory to the govt department otherwise they too will hoard and make killing.

StyleDestino
from Mumbai |

Umesh sir.. you gave some good suggestions. However I think not all of them are realistic. Employees 2 lacs? It depends how they would format their stores. Such high numbers might not be needed.

Healthy competition is good for the market, and with the entry of the foreign players in retail market, the consumer would have wider option and better pricing. Yes the mom and pop would be sufferers I agree, but they cant be washed away. End of the day if you need your little bits and bobs, u need them. Even in foreign countries despite teh hige Walmart, tescos and sainsbury's of the world the mom and pop exist. You cant run to a superstore all the time. It has its pros and cons, but see the huge doors it will open up for the country - consumers will be benefitted, increased job opportunities that will help the lower class to move up the income ladder, lots of female will have another area to work in (After all service sector is where they can work confortably).

The conditions should be realistic and benefecial for all. Eco friendly practices and non-dumping clause are very good recommendations and must be put there.

umesh derebail
from Mumbai |

Yes i agree overnight 2 lakh jobs cannot be created, let us give a 5 year time frame, it is one of the justification to bring in FDI in retail.

Secondly nobody would like Mom and Pop stores to close down, i believe presently only 10 lakh and above populace such retail outfits will be allowed which beats me, since in airline business non priority routes are covered, the same logic should have been applied here to ensure that people don t move to bigger towns for shopping.

Finally dumping from Chinese companies is what India should be alert against.  Most of the goods what they produce is not eco friendly too.

Mayur
from goa |

If you follow business and finance news you may already know about the historical decision yesterday indian gov took to allow 100% FDI in retail in single brand retailers and 51% FDI on mutibrand retailers. What it means the single brands like nike , reebok, adidas etc which had to open shops with partnership with other indian bussiness people are now free to open 100% owned shop. But the more important decision is to allow 51% FDI to multibrand retailers like walmart, k-mart and other multinational supermarkets. means now they can open their branches in india.

I for one welcome this decision by gov. Mostly all the retail sector in india depends upon the small general stores in local areas. Now there are some bad points about these small shops like

1) Mostly this shops have very poor storage facilities and so high amount of food stuff is wasted.(Big retailers have highly managed and planned storage which helps to reduce food wastage considerably)

2) The financial transactions in these shops are very hard to keep an eye on, which enables the shopkeeper to evade taxes easily.(The transactions of big retailers are easy to keep an eye on)

3) The small shopkeeper plays a very significant middleman role, gaining high margin in transaction from the producer to consumer.

4) Mostly all of the shops in a local area form a kind of union, increasing and decreasing commodity prices on their will. Many times they show artificial scarcity to increase the price of the commodities.This leads to a artificial inflation.

There are also some -ve points of supermarkets like

1) The small shops of the neighbourhood play a very imp role in our cultures and this may be threatened due to the supermarket.

2) People tend to buy more then they need when they buy from the supermarkets. They are lures in the traps of discount sale and other special offers.

But someday India will have to move on. Mostly all the major countries of the world have accepted the supermarkets and have been successful in controlling inflation through them.

Yes this will slowly change our culture but it has to happen someday. And its not like all the shops will just vanish in couple of years. All the rural area will always have this shops. There has been going some protest against this decisions(ya the old vote bank politics) But remember many also protested during the liberalisation of 1992 but without it we could have never been able to play any significant role on the world platform without it.

umesh derebail
from Mumbai |

I am afraid the checks and balances to regulate the Big retail formats are not in place.  The hoarding of stocks in essential commodity can hike up the rates, the regulators should have control over these items and access to their purchase price and quantity stored.  Secondly job creation is vital, the move is supposed to create 4 to 6 million jobs directly and indirectly the same numbers.  I hope it is monitored by labour department.

Guha Rajan
from Chennai |

I don't understand, why this had become important topic towards discussion (Is it to divert attention??). Just look around and see for yourself, if there are any gadget which is totally Indian made.

Cars - Foriegns brands.
Bikes - Foriegn brands.
TV - Foriegn brands
Microwave - Foriegn brands.
Washing machine - do-
Mobile phone - do -
Laptops - do-

Even real estate has opened up in 2005. At that point of time, I did not see any opposition.

I see "Washington" & "China Red" apples sold at nearby Mamaji shop. So whats the point in opposing Walmart to come and sell "Nagpur" Oranges, if it of good quality & cost effective.

Normally manufacturing & real estate should have been protected as they are real value adds and generate lot of employment opportunities, when this has been opened up for foriegn investment, I really don't see a point in protecting retail investment. Further, is our Indian retailer selling only Indian product?

Animesh
from Mumbai |

TV - Videocon (Videocon is the only manufacturer of picture tubes and all companies in India take it from them).

Wasing Machines - Videocn is again a leading in this sector and same is the case with all other household accesories.

Mobile Phones - Micromax is fast growing.

It is our mentality that we see good in forien brands. Look at the road, the moment people see any 'gora', they look at them as if they have never seen any human. We are over obsessed with them.

If we want to grow and be a developed country, we need to look at cottage industry. How many developed country do you see who have obsessed with foreign brands?

Vishal Kataria
from Thane |

@Animesh, Videocon is no longer the leader in washing machines. I doubt if they are in TVs either. If we had not opened up and allowed competition to enter, we would still be using CRT TVs. LG and others would not have come in to improve the quality of electronics if we had not opened that sector to foreign competition also. We would still be driving Maruti 800s, Ambassadors with 5 year wait periods. We would not have MicroMax , LAVA, etc. handsets but would still be using handsets which looked like cordless phones. Mobile phone penetration would have been 10 - 20% as MTNL and BSNL would hold monopoly and provide those to people at their whims and fancies. If we had not globalized, you, me or anyone here would probably not know what blogging is Laughing.

Never has something better come in and adversely impacted India.

Ram A Singh
from Silvassa |

FDI in  retail is not good because  retail sector doest not need much technology but need finance to create infrastucture so finance can be provide by our bank to India retailer to create infrstructure  if Government so crazy forFDI they should allow in such a sector which need much technological advancement sectore like Power, shipping etc. Nut I totally disgree with the argu,emt that small vendor like rediwala or small kiran shop keeper will die after FDI so I donot have sympathy with them because they sucking the blood of general public. a samll vegitable vendor charge marging on green vegitable more than 200-300% so  we should not show any sysmpathy with them. But support big mall operated by Indians like reliance or Bigbazar because small shopkeer are blood sucker/

The Sorcerer
from Mumbai |

Mall run by Indian coorporates are fair enough. Don't allow International corporates to bring their baggage here and make a mess of things.

Vishal Kataria
from Thane |

Protectism until 1991 was what bled India. While Indian companies refused to improve because of such a strong hold on the market, the consumer suffered... Anand Mahindra has rightly pointed out that if we are so worried about foreign companies, JVs in the automobile industry should also be banned.

Foreign retailers will push Indians to be even more efficient. They will bring about improvements in storage, logistics, pricing and sourcing in India; all of which are in appalling condition but the government does not care to sort. These large companies will eliminate middle men and prove to be more beneficial for farmers and consumers as farmers will get paid more while we consumers pay less for the same goods. More money pumped in by them will also mean more jobs for Indians. The organized retail sector comprises of only 7% of retail. That will go up and improve our overall GDP.

You already have heard the talks about why mom and pop stores/kirana stores will not be impacted. I fully agree. If they had to be adversely impacted, that would have happened when Big Bazaar & D Mart came up. But did it happen? I know the word is that where Walmart opens, local shops shut down. But, my friends, all that is subject to the locality. Walmart & Tesco will not enjoy the competitive advantage (logistics) in India as our awesome infrastructure ensures everyone is at the same level. All foreigners will have to remodel their business plans just like Honda, Bajaj, etc. have to do for India. If you think FDI in retail (multi brand) in China has hurt the local stores there, I can assure you things have not changed one bit. Nor will they change here...

We just have to open our minds and embrace something which will better our lives rather than being apprehensive about how it will harm us. Not eveything in this world that comes into India negates our economy like Nehru used to claim. We use the web almost everyday every minute. Am sure there must have been opposition to us being a part of globalization. Would you be able to use Indiblogger if we had given in?

We're in the 21st century... We must think like mature, well - opiniated people of that age...

Cheers...

umesh derebail
from Mumbai |

The biggest benefit of these retail chains is creation of Parking space even though paid ones, this infrastructure of Parking will avoid Traffic jams in cities.  Secondly they will realise high priced goods will not move from the counter, than they have to cut the price by 40 to 50% and dispose off.  Thirdly the employment scenario will improve, exploitation of child labour by mom and pop stores will be avoided.  Fourthly leased or rented stores will earn maximum revenue for the developer unless they own the stores.