Implementing FDI in Multibrand Retail in India-
Managers Perspective


By
Rohit Prakash Singh
Student
Suparna Gupta
Student
Faculty of Management Studies
BHU
 


The government of India came up with the much awaited set of reforms to revive the growth trajectory of the Indian economy. The opening of FDI in multi-brand retail to an extent of 51% has been welcomed by the corporate houses, financial institution, and government bodies but at the same time it has been criticized by the opposition as anti-people. A lot has been talked about the gains and losses of the government and the people but there is another clan which needs to be evaluated before coming up with futility of FDI in multi-brand retail upto 51 % i.e. the Indian Industries.

The Indian retail market is the fastest growing market in the world. The estimated size is about US$ 450 billion with 1.2 billion people being the direct market. The opportunity is large for the entrants as the unorganised retailing prevalent in India gives a lot space to organised retail sector which is still a meagre player with 3% market share. The market expects the sector to grow 3 folds in the next 5 years due to this reform. The sector worth approximately $7 billion is expected to grow to $20.25 billion by end 2016 according to the US India Business Council.

Though criticised over the issue of small players being wiped out, the government has tried every bit to protect the Indian industry from being wiped out by the larger global players by setting various constraints. These constraint limits the fangs of the global companies and at the same time provide opportunities for the small Indian players to enhance their competitiveness. The 30% procurement of goods from the SME's is a good move from the government. With technology up gradation and a larger demand pushing the sector, the quality will improve and so the rise in profitability. Though it seems to delve the foreign players about the feasibility of their logistics, but in long run it will be a booster for the growth and competitiveness of the Indian SME sector.

The clause of investing 50% of the investment in building back-end infrastructure will improve the allied industries of farming. 100% FDI is already allowed in development of back end infrastructure in food processing but due to inapt front end retail selling window it has proven to be a failure. Now with the new regulation a lot will change in the food processing chain and this will not only improve the productivity of the farms benefitting the farmers but also improve the supply chain thus easing the food inflation. This will in turn bolster the Indian economy which still relies a lot on agri-products. 

A lot will change in the agri-business with the change in Indian agriculture facet as a result of scientific farming, improved warehousing and cold storage, efficient logistic and better food processing units. It will generate a huge amount of opportunity for the allied industries and benefiting them.

The criteria to open the stores in cities with population over 10 lakhs, will throw a constraint to the players of real estate. As these populous cities tend to be crowded with dearth of space for the new stores to come up, these have to move towards the outskirts of the cities. This will not only improve the infrastructure around the city but will provide and impetus to the construction firms as lot of construction will start. With slowing pace of the economy, the construction industry has suffered a lot with its allied industries like cement, steel, etc. The increase in the construction will definitely push these industries. The increase in demand will put pressure on human resource requirement and money supply in the system. This all will improve the economy which is in dire situation at the moment with manufacturing output rising just by 1 %.

Not only this, there are many other industries which will be directly or indirectly benefitted from this spurt in the organised retail sector.  Allure of the organised retail is already evident from the growing popularity of the Indian retail houses like big bazaar etc. The foreign investment in multi-brand must not be seen only as a threat to the Indian retail sector and affecting the people attached with it directly but also it should be evaluated as a change affecting the overall dire Indian economy which needs an urgent impetus bringing it back on the growth trajectory.
 


Rohit Prakash Singh
Student
Suparna Gupta
Student
Faculty of Management Studies
BHU
 

Source: E-mail December 24, 2012

 

           

 

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