The 1991 reforms marked a paradigm shift in India's policy vis-à-vis foreign capital. The 19 years of reforms era has seen progressive liberalization of the policy particularly with respect to Foreign Direct Investment (FDI) whose role in economic development is acknowledged by policy makers. India cautiously opened up to FDI with the hope that it could act as a catalyst for growth as it is believed to fill up the critical gaps of capital and technology and also be a facilitator for transfer of managerial and technical skills, for employment generation and export promotion. Keeping with the policy of progressive liberalization the Government of India has now initiated a debate ...view middle of the document...
This is in contrast to economies with a higher share of organised retail where farmers get two-third of the consumer price. The government run agricultural ‘mandis’ have become ‘monopolistic and non-transparent’ in nature over the years and have failed to protect the interests of farmers and consumers. The large chain of intermediaries means farm-to-fork supply chain is nonexistent in India and consumers pay a huge premium which goes into the pocket of the intermediaries and not the farmers. FDI in retail will ensure creation of a supply chain which will have a sobering effect on prices, and also guarantee a fair price to both the farmers and consumers.
The opening up of retail sector would also address the infrastructural shortages in agriculture. India loses around Rs. 1 lakh crore of food products, including fruits and vegetables owing to bad farming practices and lack of structured farm-to-retail cold chain infrastructure. FDI in retail could bring along huge investments in cold storage chains, agro-processing and other back-end infrastructure which could reduce the post-harvest losses.
Organised retailing could also encourage direct marketing, access to modern technologies and even contract farming. This would give farmers a better price, steady income and better access to changing consumer preferences through private investors.
FDI in retailing could revolutionize the agricultural sector as it opens the sector to well functioning markets and enhances its access to infrastructure which could drive growth, employment and prosperity in rural India.
The biggest area of concern has been the impact of FDI on small kirana stores popularly known as Mom & Pop stores. The Department of Industrial Policy & Promotion (DIPP) discussion paper on retail states that small retailers may not be impacted after all. Fears of adverse effects on existing retailers are grossly exaggerated as per industry studies. The large retail players have not eaten up the small traders’ livelihood and studies show that kiranas are now sourcing from supermarket chains. The unorganised retail sector in India has grown at over 15% per annum in the last few years despite the emergence of organised retailers. It is also important to note that nine % per annum growing India’s retail market, huge population, rising incomes can co-exist along with neighbourhood stores.
FDI in multi-brand retail could throw open employment opportunities. According to National Sample Survey Organisation (NSSO) data of 2007-08, retail trade employed 7.2% of total workforce and provided job opportunity to 33.1 million. These numbers increase by a multiple times with FDI in retail which would add value and hence create jobs.
The advent of FDI in retail would also make India a source for goods for international outlets of these multinational companies. This would help in boosting exports and integrating Indian retail chains global supply chains.
Thus the ability to create jobs,...