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FDI in Retail: Do you support?

Discussion in 'Hangout' started by ramjn, Dec 12, 2012.


FDI - Do you support?

  1. Yes

    12 vote(s)
  2. No

    5 vote(s)
  1. fiatlover

    fiatlover Esperto

    Grande Punto 1.4
    We can if they list in BSE or NSE. I dont think we can buy foreign stocks unless you are an employee of that company.
  2. shams

    shams Esperto

    At the expense of modernization few jobs will always get eliminated. That doesn't mean that we should turn a blind eye to progress!!

    I hope those who have voted NO here know about this:
    Even if the profit made by middlemen goes to walmarts and alike, atleast it will be ensured that crops are not wasted and farmers are benefitted more by being able to sell whatever they grow! This also can lead to a reduction in farmers suicide which is a major problem in many states presently!
    Last edited: Dec 12, 2012
    1 person likes this.
  3. mightymaveryk

    mightymaveryk Regolare

    Grande Punto 1.3
    What my opinion is the FDI should not be allowed inside here. We had Pepsi and Coke came here. They started as Pepsico India and Coke India. They sucked all underground water, taken all the profits to US and made us unhealthy. The Dominos and Pizza Huts kills our youths.

    We can encourage the multi-brand retail stores of Indian corporates (Big Bazaar from Future group, Star Bazaar from Tata, more stores from Birlas, Fresh from Reliance, etc), even though they have some foreign funds in their investor list; only thing is regulations should be strict.

    If we allow these foreign big brands in multi-brand retail we will be losing our economic status. The world may say that it is an economic booster but really it is not. For example, in the current scenario, the grower, the middlemen and the seller are all Indians so the money circulation will be within India. If they allow FDI (51%+ share) what happens is that they will sell the products what we grow and take the profit to their countries. So where the real benefit comes? The politicians who brought them may get benefit (cash, shares, etc) but not the common man.

    The people talk about the prices will go down because these people will buy from farmers directly (The Indian corporates keeps agents in all area under their salary to buy the crops/goods). This will kill the cultivatable land and later the farmers. These brand stores mostly put agreement for long term with the farmers to supply a specific grain/vegetable for specific years. The farmer cannot cultivate anything else. They includes such clauses in the agreement. If am not under contract to supply to these people, I will check whether there is rain and I will grow some crop which needs heavy water usage. Otherwise I will grow the crop which don't need much water so the soil will be recycled automatically and it will always be fertile and I too won't suffer anything (most of the farmers don't do this because they fear). If I grow only the same crop, the fertility of the land surely will go after a certain year and my cultivation will come down. It is a loss in long term. Even if I grow something else than the agreed crop, my contract will become void and I need to compensate these people, that is also a loss.

    This generates employment. Ok. I agree. Have you seen the people at the billing counter? They stand for hours without rest. Doesn't it against the Human Rights? For these people too, they pay 5k-8k as salary (this may be big for some families from villages but why shouldn't the government create infrastructure to make these people enter agriculture?)

    So my choice is a big no-no for the FDI in retail.
    1 person likes this.
  4. gurjinder

    gurjinder Staff Member Janitor

    Very pertinent points.

    Allow me to present a few counter points to enable a healthy discussion on this issue.

    Completely agree with them depleting our water resources. To save many a buck, they chose the easier way out and pumped out precious groundwater. But coke, pepsi, pizzas sell because people want them. Everyone knows about their not so beneficial effects but that's the nature of the beast.

    For a country to progress forward, it needs investment. India , burdened with a huge population and area needs as much investment as it can gather. To enhance it's investment kitty, it must look at sourcing investment from abroad. In today's world you cannot live as an isolated island. As in my previous post, they are bound to spend 50% of the total FDI amount on back-end infrastructure. That will inevitably lead to infrastructure where none exists at this moment.

    Also, the majority of the money being pocketed by the middleman is one trend i'd like to see eliminated soon. I'd be happy to see the farmer get his rightful due. And worry not, this is not the British Raj's Economic Drain. We are calling them to our land because we're going to invest their money in our land to better it.

    If a farmer is assured of a good price for his crop over X number of years via the agreement, then why not. He stands to benefit from security of purchase and not just be at the mercy of middlemen or the Government to pick his produce up from the wholesale market. He can be offered a pricer higher than the Minimum Sale Price and consequently reap benefits.

    Yes very true. If you come to Punjab, you will see people are stuck in the wheat-paddy cycle for decades now. Even before there was such a thing as FDI. But, what if the person who has been stuck in a wheat-paddy cycle suddenly sees an opportunity to grow say potatoes or veggies and in turn breaks away from the cycle? Wouldn't that help in the larger scheme of things.

    The Government is. And it needs help from other sources to help it's efforts.
    1 person likes this.
  5. Well i am not economist but just think about this Walmart coming to India and getting money from an Indian bank by flouting of the parent company business revenue,that is possibility also our banks will in queue to lend them money at far lower interest than what they do for citizen of the country.Do you think they will bring truck loads of money to India, I beg to differ on this.

    I would like share a article by proffessor of IIMB on FDI

    RRetail FDI- Creating political storms—Free Press Journal

    The announcement by the government about cabinet decision on 51% FDI in Multi Brand Retail and 100% in single brand has created significant debate among political parties even to the extent of affecting the stability of this Government.
    Trade constitutes the largest segment of the economy with a nearly 16.7 % share in NDP in 2010- 11, that is, in the aggregate NDP of Rs 43.2 lakh crore that year trade accounted for Rs 7.2 lakh crore [at 2004- 05 constant prices] higher than the share of manufacturing [ at 13.4%] and Agriculture [at 15.0%]. (National Accounts Statistics of the CSO, New Delhi 2011).
    Trade is conducted mostly [more than 80%] by partnership / proprietorship firms with active involvement from members of family and community. More than 125 lakh kirana stores provide a source of livelihood to nearly 16 crore people. Retail trade has grown faster than the economy: it registered a compounded annual growth rate ( CAGR) of 9.2% between 2004- 05 and 2010- 11 when the Indian economy grew at 8.6%. The retail trade comprises all kinds of people and formats - from street vendors to departmental stores of various types, shapes and characteristics.
    More than 80% of trade is accounted for by partnership and proprietorship forms - often called the " unorganized"
    sector. The kirana shop adjacent to my home opens at 7am and closes at 10pm every day, 365 days of the year. It is very efficient, and one can order through a mobile. The owner knows the tastes and price preferences of our family, but his business is classified as " unorganized" by our experts and economists.
    THE retail trade suffers from two major handicaps. One is the non- availability of credit at reasonable rates from institutions; the other is the bribe one has to pay to the government babus to leave him in peace
    Two main arguments are given for this decision. One it will improve logistics/ supply chain and enhance agricultural efficiency and the other is it will bring down prices to help consumers since middlemen are eliminated.
    My vegetable vendor carries half a truck- load of vegetables on his TVS 50 at morning 5am. In India small businesses use capital more efficiently than big ones- So supply chain if at all will be more expensive. As far as consumer prices - they may come down initially but global experience suggest after " predatory pricing for some time" global companies will hike it to much higher levels since they need to increase returns.
    The other argument is that the MNCs bring " funds" and " efficiency" . An MNC does not normally bring funds from outside sources as it can access them in our market by showing " comfort letters" from their parent companies.
    Many financial institutions, both government and private, are ready to lend to them below the prime rate as they are " Global". That the MNC will bring funds from abroad is largely a myth.
    Remember, Enron which was supposedly bringing Rs 10, 000 crore from outside. The final result is that Indian FIs are holding more than Rs 6,000 crore of worthless paper.
    Has anyone studied the " aggregate cost" of these global retail chains? Most American homes have a retail store in their basement.
    In the US, it is an issue of labor shortage but in India there is surplus that is part of the large self- employed group. For the economic expert goods held by household is consumption but held by mom- and- pop store is inventory.
    Hence, inventory reduction has been achieved in the economy. Not much space is available in Indian houses to convert them as " retail stores". Another aspect is the fuel cost of driving long distances to the super- market and spending thousands of man- hours between aisles. Plus mobile phones are useful in placing orders from our Mata- Pita stores [also known as mom and pop stores in USA].
    All petroleum services and products, rice, tobacco, salt, alcoholic beverages and fresh food traded at public markets are excluded in Japan from any " distributional aspect" by companies of other countries. Australia, Japan, South Korea do not allow trade services in petroleum, its products, rice, tobacco, salt, milk, fertilizers etc by foreign companies.
    French using their Loi Royer simply restrict any development of hypermarkets to protect what they call the " centres of French towns and villages and the living of small shopkeepers". Germany has legislative constraints on outlets above 1200 sq. m.
    Very cleverly, the Central government has allowed the State governments the final say in allowing FDI in retail. This may to some extent pacify those State governments opposed to big retail. We are signatory with more than 70 countries on to Bilateral Investment Promotion and Protection Agreements ( BIPAs), India has to provide national treatment to the investors. State governments therefore, may have to open up for big retail. Industries will use the legal option to force the States to comply.
    The paan- chewing, dhoti- clad, English- ignorant retail trader should not be seen as an inefficient entrepreneur who needs to be bleached by globally- accepted detergents. What he needs is a level playing field, in the full sense of the term, with access to affordable credit and the abolition of inspector raj in the form of harassment by various arms of the government. Let us remember that we are still a savings based, family- oriented economy.
    ( The author is the Professor of finance at IIM- Bangalore. Views are personal.)

    TEL: 91-80-2699-3086
    E mail:vaidya@iimb.ernet.in
    4 people like this.
  6. gurjinder

    gurjinder Staff Member Janitor

    It would be imprudent of me to even try and criticize an article written by such a distinguished luminary. He is an authority on the whole subject of "black money" as well. However i wonder why he has dressed the article in a way so as to portray that this FDI thing is the coming of the end of the kirana shops. Kirana shops aren't going anywhere.
  7. mightymaveryk

    mightymaveryk Regolare

    Grande Punto 1.3
    I disagree with this a bit. In Bangalore you can see HOPCOMS stores (Karnataka government allows to set the shops of the Horticulture farmers to sell their products directly; so I can get cheap). As well in Tamil Nadu, MK opened farmer's market called "Uzhavar Santhai". Here all farmers will be allocated a 10X10 space with shelter and issued with ID card. They can sell what they grow. This was huge success at that time and still in few areas the concept is running whereas in most of the areas it was closed because of no support from the other government that came in next term. The Central Government can bring some such idea and they only need to worry about the storage. Every year 35% of the crops stored in the government godowns go waste and we purchase the same crop from other countries (Remember the wheat purchase from Australia). Government didn't taken steps to correct the infrastructure but they are very keen on the FDI because the storage will be taken care by these people (Escapism?!).

    The issue with the big players is that the farmer should be giving the same crop, not the other crop they can even grow. If the agreement is saying the potato or any other veggie, for next 5 years the potato or the other veggie only will be grown. After 2 years of the cultivation, the crop should be changed whereas the farmers under the agreement cannot after 2 years. So again the fertility of the land goes down for potato or other veggie. What the farmer will be benefited for the next 3 years? Only breakeven or below breakeven.

    The Government is not. A specific type of rice in South (varagarisi) the poor ate (really healthy one) now costs Rs.45/kg it is because the rich people started to eat it to get back their health. In case if the government needs help, they can tax more the things that the rich people use (you may remember that the dog-food was exempted from tax 2 years back. The poor people feed the canines just what they eat and the rich only will feed their dog some imported stuff). So where the government is taking step to improve the living standards of the real BPL people?

    As well now it is clear from the Walmart's balance sheets that the firm used 125 crores since 2008 for lobbying to get the things done to enter into Indian market. So who benefited?

    - - - Merged Post - - -

    I accept this. There was a far cry in the mid 80's that the computer will demolish all the jobs in India but it happened ulta. So it don't definitely kill kirana shops. There don't be new kirana stores but the old ones for sure will run. The only thing is it will reduce the entrepreneur skills from the youth and they will think about just working for Walmart.
    Last edited: Dec 12, 2012
    2 people like this.
  8. I agree entrepreneurship opportunity for people who are not into technology area will reduce,but a the same time why we can't develop our self to be an entrepreneur in technology area?
  9. sungoa2010


    Another good thing is it creates lot of temporary job opportunity. It allow youngsters to work and study on a shift basis. Nobody will be willing to take the job in such shops as main income source. They are ideal for students to work and study. It will help them to understand the value of money and a work culture during their studies. Not like the current paper degree in India. This is far from the main topic of the thread subject but a indirect effect that is good for the society.
    Last edited: Dec 12, 2012
  10. mightymaveryk

    mightymaveryk Regolare

    Grande Punto 1.3
    I didn't see any such opportunities in the multi-brand retail. In that case you need to see a lot of students working in the multi-brand retail stores that are already running (big bazaar, star bazaar, etc) in India. If a guy want to fund his study by himself, he will definitely find the way (my father just funded my tuition fee and I managed my exam fee, books and even the expenses of my project 10 years back). For that I don't need a walmart.

    In these years (almost 3-4 decades) how many technology entrepreneurs we created? We are creating the engineers who can work for some MNCs not much entrepreneurs.
    Last edited: Dec 12, 2012

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