The post first appeared in FIRSTBIGLEAP on November 28, 2011.
"Yeh mera India…..watan mera India…."
Could not think of a better line to start writing about FDI and the recent developments that the UPA Government is trying to bring about which looks more like a image makeover attempt.
Shah Rukh Khan first did Pardes and then followed it up with Swades. Probably even he was sure that Politics and Corruption will will take the Country places and BLACK MONEY that exists will make money for him.
In short anyone can make money here in India.
The once dreaded thing of being the most POPULOUS Country in the World has paved the way for “The Youngest Working Population class” in the world breeding with Entrepreneurs and innovative ideas yet stuck due to lack of Government reforms and long-drawn process of “Putting Ideas into Practice”
By now, many of you might be thinking where is the blog on FDI, well the Investments have not yet started, so the details on the policy and its impact would also take some more time to come.
Please co-operate ( Pun intended - UPA Govt to Indian Consumer and Industry Observers)
Just months ago, both Tamil Nadu and the epic long West Bengal ruling Governments experienced changes in power. Yes, they had promised the DEVELOPMENTS and CREATION of JOBS that would change the Lifestyle of people. Well that only changed the “VOTEBANK” of these parties, the rest is yet to come.
What has changed and increased is Inflation, Petrol Prices, and the Money in the Swizz Bank A/cs (could have also decreased after the Swizz Government agreed on the information sharing)
My friends, the above was just a short recall of the Governments doing in the past couple of years. Now after two whole decades since India began its economic liberalization initiative in 1991, the policy on FDI in retail has finally reached its current status. While some regard this as Image Makeover attempt for the UPA Government, (after all the Corruption scandals and scams), yet it will definitely pave the way for several global retail chains to make their foray into India and enter the $500 bn Indian Retail Market.
Earlier
- 100% FDI is allowed only in the wholesale (cash & carry) market
- 51% FDI is allowed in Single brand retailing like Adidas, Tommy Hilfiger, etc.
- FDI is not allowed in the Multi-brand retailing like TESCO, Carrefour, and WalMart
Highlights of FDI in Multi-brand Retail
- Union cabinet clears 51% for multi-brand supermarkets.
- Minimum investment from foreign retailer is $100 mn.
- At least 50% of the total FDI must be invested in ‘back-end’ infrastructure.
- Minimum 30% of the local sourcing requirements from small industries.
- Retail outlets to come up in cities with more than 1 million population
- The govt will have the first right to procure agricultural produce.
Chain stores account for just around 6 percent of a $500 billion retail market dominated by street stalls and corner shops. Today, the organized retail market in India is estimated to be worth around $28 billion; and is projected to grow by 10 times by 2020.
The FDI floodgates have opened mega opportunities for not only brick-and-mortar retailers, but for their virtual peers as well. With the policy leg up, global players like Amazon, eBay and Alibaba are also expected to start shopping for Indian companies to step up operations.
The morning after the Cabinet approval, I received a mailer “BE INDIAN, BUY INDIAN”……So are we following the USA in this too. (Refer – Rage in USA to buy only American made products, boycotting the Chinese and products from any other Country)
To appease opponents, the government said foreign stores will only be permitted in cities of more than 1 million -- of which India has more than 50 -- and individual states can decide whether to allow global players on to their patch.
About 5-6 million of the 8 million FMCG-stocking kiranas are in rural India, and are totally safe, as the new ones can only come into the top 53 cities. The Global giants cannot provide facilities like free, prompt and no-conditions home delivery, superior and customised customer relationship management, khaata credit and willingness to stock small quantities of something used by only a few people in their catchment - a classic 'long-tail' strategy.
Inspite of all this there is also a proposal for letting state governments have a say on whether foreign-owned retail businesses should be allowed to set up operations in their states or not, on the ground that “trade and commerce within the state” is a matter reserved for the state to legislate on. This could be a bit of a worrying proposition for foreign retailers.
India’s largest private firm Reliance Industries (who faced opposition with its Reliance Fresh stores in Uttar Pradesh) have had a taste of how state governments and local issues can be a big dampener for physical stores.
The Parliament has already been stalled because of this proposition by the Government of FDI in Retail, not realizing the fact that many other Bills are also pending including the Lokpal Bill.
Warren Buffet in one of his quotes had said, “Make the Parliamentarians responsible for what they do and they should be forced to step down for any increase in Fiscal Deficit”
Lekin Bandhu re, “Yeh mera India…..watan mera India…..FDI ho ya SONIA”
