fdi-need or not

fdi-need or not

An intense debate is raging on the issue of whether FDI in multi-brand retail will benefit the country. A majority of people agree that this will benefit consumers by making available a wider choice of goods at better prices. And we are all consumers first. Many would perhaps also agree that the move might benefit farmers through backward linkages - by establishing more efficient supply lines which save on wastages and cutting down intermediaries. This could mean better prices to farmers for their produce. 

Farmers can also be incentivised to produce better quality products for which consumers are willing to pay higher prices. But for this to happen, one will have to do quite a bit of work: organise farmers in clusters, invest in back-end infrastructure, provide extension work and then connect them to front-end retail chains. This means cleaning up the APMC Act too. It is not going to be easy, and will not happen tomorrow, but can be done within a reasonable timeframe, if the Government policy provides incentives to do so. This can also help tame inflation. 

However, the debate is stuck at an impasse, and getting more bitter by the day, on the issue of kirana stores - will they survive competition from the "bigbox" foreign retailers? What was the experience of other countries which opened up to FDI in retail much before India? What was the experience of small shopkeepers in India when competition arrived in the form of organised retailing ? 

If one looks at China or Indonesia two populous Asian countries where domestic retail had been dominated by kirana type stores - the indications are clear: kirana stores are going to stay here for the next 20 years at least, though their relative share in a growing retail market will drop as they grow at a much lower rate than the "big box" retailers. Some in the periphery of these mega retailers may also get hit adversely. 

However, the lurking fear that local kirana stores might be wiped out does not hold up to a...

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