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Last Updated: November 28, 2011  5,168 views

What is the meaning of FDI in retail market?

in: India

walmartEarlier we used to have 100% FDI allowed only in the wholesale (cash & carry) market, 51% FDI allowed in Single brand retailing like Adidas, Tommy Hilfiger, etc. However, FDI was not allowed in the Multi-brand retailing like TESCO, Carrefour, and WalMart. Now, we will have 100% FDI allowed in Single brand retailing. This means that now global companies like Adidas, Nike, Tommy Hilfiger will be able to own 100% of their retail businesses in $500 billion Indian Retail Market. Earlier, they had to come with some partner, for example, Nike entered partnering with Sierra Industrial Estate Private Limited and Bridgestone entered in partnership with ACC limited.

Only 51% FDI is allowed in multi-brand retailing with some investment conditions to protect the age old kirana stores. This means retailers like TESCO, WalMart can only set up their retail stores in India in a joint venture. The policy of allowing 100% FDI in single brand retail can benefit both the foreign retailer and the Indian partner as foreign players get local market knowledge, while Indian companies can access global best management practices, designs and technological knowhow. This means that there will be a win-win situation.

However, there are some serious concerns shown especially by political parties that the global retailers may cause big losses to the local kirana stores of India and ultimately cause shut down of the small traditional retailers in India. However the Government of India saying that this policy will improve the back-end infrastructure and the supply-chain which may help reduce wastage and curb inflation. It may create millions of jobs in retail sector. It will give more varied choice, value, and experience to the Indian consumers.

Normally the unorganized retailers do not pay tax and after the new policy organized retail will increase white money in system because everything you buy from a big mall will be taxed. So Government’s income will increase and more funds will be available for infrastructure development. The profit of middleman now would be distributed to customers and in improving products which will create more jobs. Cash transaction will be reduced which will pile more money in banks rather than on the galas of kirana shops. Those money would be leveraged to fund growth.

The old system is beneficial only for middlemen, black-marketers, hoarders and adulterators. These vested interests eat up more than 88 % of the selling cost of any item sold at retail outlet and the producer or cultivator gets only 12%. If opposition parties are against the proposal, the government should at least implement it in Congress ruled states on experimental basis.

  • 1

    Do we want freedom from the clutches of greedy money making foreign investment? Let us take the example of Soft drinks in India. Before the arrival of Coco-Cola, Pepsi, 7 Up etc we had millions of colour sodas, ordinary sodas served through cycling? They all disapeared. But our PM can claim many are employed and the quality is better. In the beginning Soft drinks were very cheap. Once the millions of Cycle valas are wiped out, the MNCs of Soft Drinks raised the prices of Soft drinks. Ground water was exploited.THe same will happen concerning the FDI in Retails. In the beginning the customers will be very happy that MNCS shops will be cheaper. Once all the Indian Retailers are wiped out, MNCs will start raising the price. Is there any control over the price rise that is going on in this Country? Is there a Government in this Country because every thing is Privatised. This is the vicious circle in which we are. STOP THIS.

    Sanjay on December 7th, 2011
  • 2

    why this step was not taken so might get dispose middlman earning

    krishna on September 24th, 2012
  • 3

    full ghapal

    kk on September 26th, 2012
  • 4

    According to time of 21st century & Global standards, it is necessary.And by this our farmers can get more profit on their production.However if 10 people will lost some share of their profit but more then 40 people will get gobs.But big thing is that our govt. have to make full control on foreign investors.

    Himanshu on December 3rd, 2012
  • 5

    It is very very very bad. plz wake up India

    shashi on December 6th, 2012
  • 6

    Government should not be blamed &cursed for everything &anything they do which are wrong according to the people.Please spare some time to analyse why this&what are the reasons behind it.

    Sugam agarwal on January 31st, 2013
  • 7

    I have a full faith in govt.

    Sugam agarwal on January 31st, 2013
  • 8

    Lwts assume we gave multi branding 100% FDI in retail. One local kirana market will go out of business and 20 more unemployed people will get a job to support their families. This will increase the nations income. So i would like say something to you “Sanjay” stop being nostalgic and think about the welfare of our country. Do you see Modi crying about Barista, Starbucks etc. putting roadside “chai valas” out business.

    Vaibhav on May 31st, 2016