FDI in Retail

Vacation blesses one with time to relax. I am no exception. I was watching a very interesting and engaging discussion on the tube the other day, on FDI in Retail. Panel participants represented different backgrounds, to bring diversity to discussion. In spite of the diversity the discussion was vibrant throughout. What got established for a fact were that just like other important sectors, the Government has failed to draft an overarching policy paper to guide and govern this business. Lack of clarity on the part of our Government’s stand on various aspects has left the stakeholders groping for answers on their own.

Let’s dwell on a couple of cogent points of debate……

Should we open up the Retail sector to foreign investors?

What is the size of unorganized retail in India? What will become of entrepreneurs who are part of the unorganized retail?

If we do open up, should we enforce sourcing from India for everything that hits Indian retail shelves?

Is there a way to improve Indian production to global standards so as to win some part of the source business, from our neighbors China?

If we decide to open up, it will offer a better choice to consumers, for sure. But will that alone create a sustainable economic model? Is there another market with socio political and economic limitations like us that has imbibed the opening up of retail to FDI? What are the learning in those markets?

We know for a fact that the production efficiencies are better in China, which allows them to price their products low. The trick here is to produce better quality that China, so as to justify our high cost. Or are we inferior in all three aspects…….efficiency; cost and quality? If the answer to this is yes, then FDI may not be a great move today. 

How long can we not open up, simply to put up with inefficient ways of production, is what we need to address as a nation and community.

Talk of FDI is Achilles heels for the unorganized Retailers in India, as they foresee losing business by way of market share dilution, as well as margin. But what may not be coming to fore is the fact that these neighborhood stores have been and will always be convenience stores. That business is for them to spruce up and maintain.

In any case the reason for liberalization is always to grow the market and increase consumerism. That in turn brings in economic growth. What is imperative is a sound Policy framework to be created keeping in mind the landscape of India, socially, economically and politically. What is also important is to put in place a regulator to orchestrate this melancholy into the music of monies. This brings us back to how dependent the country, this time the economy is on a very functional and intelligent Government.

I think we still have some yards to go, before we have a political setup with such delivery mechanism.