Cabinet yesterday cleared FDI In Retail in multi brand retail category. Now Foreign Direct Investment of 51% can be done by foreign retail gaints like wal mart , tesco in Indian retail industry. Along with this cabinet cleared 100% FDI in single brand retail category.
The clearance does come with few riders which are as below :
A) These companies who invest FDI in retail would be allowed to have retail centers in places with population of 10 Lakh minimum.
B) They would have to invest 50% of investment on back-end infrastructure
C) Minimum Investment would be $ 100 million
D)Procure minimum 30% from small scale units
Industry is excited with the news . Industry experts believe that this decision would offer good quality at lower cost and keep in check the inflation. Walmart buys directly from farmers , manufacturers eliminating middle man . It goes for bulk deal and that keeps in check the procurement price which allows them to sell cheaper .
Another point which supporters of this step of government make is employment which would be generated in major way . Also sector would become more organized is one of arguments in this steps support.
Now let us look at other side of story and that is fear. Retail sector is whooping $600 billion industry. Yes you heard it right. $600 billion!!!!!!!!!!!!. In India it is largely unorganized sector and provides livelihood to 3-4 crore people. If we consider atleast two dependent it would be 9-12 crore people which makes around 7.5-10% of total population..
Now those opposing the move , fear about future of this whooping population. Would small time karyana waala be able to match the might of wal mart who has deep pocket?.
But is the fear justified?. Our 61% population lives in rural areas which is not going to have presence of the stores. Obviously procurement would be done from rural area but presence wont be there. So 6 lakh villages wont have competition from walmart as far as retail industry goes. Secondly they are right now restricted to only 34 locations which has population of 10 lakh plus…
Another important point is that we already have Future Group , Reliance Fresh , Vishal mart to name few in the industry. Have their presence effected the local karyana waalas?. To some extent it might have had but largely it hasnt damaged entire structure…
Those who have fear do have their concerns which needs to be answered but I think those riders have already tried to safe guard and if what they fear do happen , we can anytime put pressure on government to review the clearance. Isn’t it?
I dont think fearing is justified for something which we have not tested yet. When ever we open up to things which have not happened before fear is natural reaction but arguing that government is selling out the country is naive one according to me.