By CMA Arif Farooqui , Practicing Cost Accountant
There is much cry about FDI ( Foreign Direct Investment) in retail but on analysis it on economical point of view, I found in current situation, FDI in retails in very beneficial for Indian Economy.
If you remember, same type of buzz was created at the time of implementation of VAT (Value Added Tax) in India. Now everyone knows, how beneficiary VAT is and all State including one who were opposed it, implement it later on seeing its benefits.
I am sure, sooner than later, same thing is going to be happen in case of retail FDI.
In past three (3) years, it is first bold decision taken by central government, it should not take back step now. Following are few direct benefits of entry of multi brand retail in India:
Creation of backend Infrastructure ..!
The government has made it compulsory for the foreign brand multi retailer to invest minimum 50 per cent if there amount into back end infrastructure. Thus giving a boost to facilities like cold storage, food grain banks etc,
Direct Benefit to Farmers..!
The biggest beneficiary of FDI in retail will be directly the farmers in India. Across the world the big retail giants buy the produce directly from the farmers, thereby eliminating the middle men.
Thus, farmers will get much better price which can be atleast 15 to 20 per cent higher than the existing price they get. Thus, farmers will directly benefit from direct purchase.
Drop in Food Wastage..!
A huge chuck of almost 30 to 40er cent of total food is wasted in transportation and poor storage facilities. Not to mention the millions of grains that rot in Government godown every year.
The government has made it compulsory for the foreign retailers to invest alteast 50 per cent of the investment in infrastructure. Thus it will become critical for them to reduce food wastage by making better storage and quick transport facilities available.
Reduction in Food Inflation ..!
The incoming of FDI will bring in strong competition amongst the retailers at the same time the elimination of middle men who are also the hoarders of stocks will help reducing the supply constraint.
The direct purchase policy of bigger retailers will help in passing on the benefit of low procurement cost directly to consumers. Thus helping in reducing food based inflation to a great extent.
Better Consumer Choice..!
The other major beneficiaries will the consumer. Since most of the retail stores operate over a very large format they generally have a large amount of SKUs (products). Thus they will store as much variety as possible. Which generally kirana stores do not keep since they are not sure of its sale.
More Purchase from SMEs ..!
It’s been made mandatory by the government for the mega brand multi retailers to procure minimium 30 per cent of its requirement from SMEs. Till today it’s been very difficult for the SMEs to sell their products via kirana stores since non existence of brand. The kirana stores used to reject the goods produce by SMEs due to lower offload. But the multi brand retailer will have to compulsorily purchase from the SME upto 30 per cent.
Earning of Forex ..!
India will earn a great amount of Forex (foreign exchange reserves) from the investments which the mega multi brand retailers will do in India.
Huge Employment Benefits ..!
The international model suggests that all those countries which opened up multi brand retail to FDI added huge amount of employment. In India the government expects it to generate minimum 10 lakh employments over the next few years.
Overall growth ..!
India's GDP has been slowing down since last few quarters. The influx of foreign funds will lead to huge incoming of investments in critical sectors like construction, employments etc. Such investment will easily contribute upto 0.5% to the GDP growth backed by other critical reforms. Though the government has to bring down interest rates to boost growth, it also has to bring in more reforms.
Biggest Loser will be the middle men, who have been hoarding the goods time and again to make super profits and to work against interest of consumers thereby leading to super inflation.
Thus one can safely say that government has done a pretty good home work before coming up with FDI in Indian multi brand retail. At the same time one must not forget that “Kirana” stores as in India also exists in US alongside Wal-Mart which is mostly in outskirts of city.
About the author..!
CMA Arif Farooqui is a Practicing Cost Accountant
Email: arif_cwa@yahoo.co.in ,raniraj1950@gmail.com
Hi,
ReplyDeleteThis is gonna shock all of you , out of your pants.
It was decided in the Bilderberg club long ago, to gate crash into Indian economy, by a conspiracy.
If you want to know what this elite club is –
Punch into Google search
THE SHREWD CLUB WITHIN THE NAÏVE BILDERBERG CLUB- VADAKAYIL.
also
Punch into Google search
WALMART IS NOT GOOD FOR INDIA- VADAKAYIL
The banking cartel has been given a toe hold in India, by giving away FDI in multi-brand retail and FDI in insurance.
Insurance affects transport costs and trade costs -- it requires perception to understand all this.
The approach to micro economics and macro economics , cannot be top down or bottoms up, every which way, based on testosterone levels ..
Economics must be re-written by Indian intelligentsia , where the TERRAIN MUST PREVAIL OVER THE MAP .
All perceptive students of economics on this planet -- please start demanding answers from your professors — I am sure you know that you are being taught empirical pseudo-science. If it is blasphemy so be it!
This must be a win-win model ensuring the down trodden are not left behind, with freedom from “risk of slavery” as number one condition.
We are confusing GDP with economic progress. We are destroying entrepreneurial activity and eating our own children.
Fitch , S&P and Moody’s are bouncers for the banking cartel. The economics of Rothschild’s Indian alchemist Manmohan and his gunslinger Montek is VULGAR pseudo science.
DORKS and desh drohis shall lay off !
Capt ajit vadakayil
..