Who really is afraid of FDI in retail?

Opposition's
argument
* Move will lead to
large-scale job
losses.
International
experience shows
supermarkets
invariably displace
small retailers.
Small retail has
virtually been
wiped out in
developed
countries like the
US and in Europe.
South East Asian
countries had to
impose stringent
zoning and
licensing
regulations to
restrict growth of
supermarkets
after small
retailers were
getting displaced.
India has the
highest shopping
density in the
world with 11
shops per 1,000
people. It has 1.2
crore shops
employing over 4
crore people; 95%
of these are small
shops run by self-
employed people
* Global retail
giants will resort
to predatory
pricing to create
monopoly/
oligopoly. This can
result in
essentials,
including food
supplies, being
controlled by
foreign
organizations.
* Fragmented
markets give
larger options to
consumers.
Consolidated
markets make the
consumer captive.
Allowing foreign
players with deep
pockets leads to
consolidation.
International retail
does not create
additional
markets, it merely
displaces existing
markets.
* Jobs in the
manufacturing
sector will be lost
because
structured
international retail
makes purchases
internationally and
not from domestic
sources. This has
been the
experience of
most countries
which have
allowed FDI in
retail.
* Argument that
only foreign
players can create
the supply chain
for farm produce is
bogus.
International retail
players have no
role in building
roads or
generating power.
They are only
required to create
storage facilities
and cold chains.
This could be done
by governments in
India.
* Comparison
between India and
China is misplaced.
China is
predominantly a
manufacturing
economy. It's the
largest supplier to
Wal-Mart and
other international
majors. It
obviously cannot
say no to these
chains opening
stores in China
when it is a global
supplier to them.
India in contrast
will lose both
manufacturing and
services jobs.
Times View
In principle,
governments
should not
prevent anybody,
Indian or foreign,
from setting up
any business
unless there are
very good reasons
to do so. Hence,
unless it can be
shown that FDI in
retail will do more
harm than good
for the economy, it
should be allowed.
A major argument
given by
opponents of FDI
in retail is that
there will be major
job losses. Frankly,
the jury is out on
whether this is the
case or not, with
different studies
claiming different
findings. Big retail
chains are actually
going to hire a lot
of people. So, in
the short run,
there will be a
spurt in jobs.
Eventually, there's
likely to be a
redistribution of
jobs with some
drying up (like that
of middlemen) and
some new ones
sprouting up.
Fears of small
shopkeepers
getting displaced
are vastly
exaggerated.
When domestic
majors were
allowed to invest
in retail, both
supermarket
chains and
neighbourhood
pop-and-mom
stores coexisted.
It's not going to be
any different
when FDI in retail
is allowed. Who,
after all, will give
home delivery?
The local kirana.
Why would anyone
shun them?
If anything, the
entry of retail big
boys is likely to
hot up
competition, giving
consumers a
better deal, both
in prices and
choices. Mega
retail chains need
to keep price
points low and
attractive - that's
the USP of their
business. This is
done by smart
procurement and
inventory
management:
Good practices
from which Indian
retail can also
learn.
The argument
that farmers will
suffer once global
retail has
developed a
virtual monopoly is
also weak. To
begin with, it's
very unlikely that
global retail will
ever become
monopolies. Stores
like Wal-Mart or
Tesco are by
definition few, on
the outskirts of
cities (to keep real
estate costs low),
and can't intrude
into the territory
of local kiranas. So,
how will they
gobble up the local
guy? Secondly, it
can't be anyone's
case that farmers
are getting a good
deal right now.
The fact is that
farmers barely
subsist while
middlemen take
the cream. Let's
not get dreamy
about this unequal
relationship.

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