MULTI-BRAND RETAILING IN INDIA:

POLICIES AND CONCERNS

CHAPTER 1
1.1 INTRODUCTION
Retailing in India is one of the pillars of its economy and accounts for 14 to 15 per
cent of its GDP. The Indian retail market is estimated to be US$500 billion and one of
the top five retail markets in the world by economic value. India is one of the fastest
growing retail markets in the world, with 1.2 billion people.
As of 2013, Indias retailing industry was essentially owner manned small shops. In
2010, larger format convenience stores and super markets accounted for about 4 per
cent of the industry, and these were present only in large urban centres. Indias retail
and logistics industry employs about 40 million Indians(3.3% if Indian population).
Until 2011, Indias central government denied foreign direct investment(FDI) in
multi brand retail, forbidding foreign groups from any ownerships in super markets,
convenience stores or any retail outlets. Even single-brand retail was limited to 51%
ownership and a bureaucratic process.
In November 2011, India's central government announced retail reforms for both
multi-brand stores and single-brand stores. These market reforms paved the way for
retail innovation and competition with multi-brand retailers such as Wal-Mart,
Carrefour and Tesco, as well single brand majors such as IKEA, Nike, and Apple. The
announcement sparked intense activism, both in opposition and in support of the
reforms. In December 2011, under pressure from the opposition, Indian government
placed the retail reforms on hold till it reaches a consensus.
1

Retail industry in India in recent times has been hailed as one of the sunrise sector in
the economy. FDI in the multi-brand retail is one of the most debated topics over the
last few months both in the parliament and in the streets. 51% FDI will open up a wide
range of opportunities for the foreign retailers such as Wal-Mart, Metro AG of
Germany, Carrefour of France and so on.

A. FDI
FDI expands to Foreign Direct Investment. It represents investment in Indian companies
by foreign entities. GOI has prescribed maximum amount of FDI that can flow into the
country in specific industry sectors. For example- the cap in the insurance sector is 26%.
FDI will be in lasting assets such as equity capital. Because of restrictions on capital
convertibility in India. FDI cannot be taken out of the country automatically.

B. SINGLE BRAND AND MULTI BRAND RETAIL

As the name indicates single brand means that only brand can be sold at the outlet. In
multi brand retail a variety of brands will be available at the retail outlet. Generally
speaking in India single brand retailing will not have a significant impact on the retail
market and will mostly be patronized by the upper class whereas multi-brand has the
potential to dramatically alter the market dynamics of the retail trade and in Indias case
the local kirana stores.

C. THE INDIAN HISTORY

FDI in multi brand retail is not allowed in India. 51% FDI in single brand is already
allowed. Foreign brands like Nike, Addidas, etc. are already present in India. 100% FDI
is allowed in cash and carry retail where all transactions are by cash upfront. FDI

participation can only be through franchise relationship or as wholesalers. Foreign

chains operating in the cash and carry business in India are

Wal-Mart- It has a franchise relationship with Bharati Entreprise (the parent arm of
Bharati Airtel). It operates 14 stores.

Tesco Plc- It has a franchise relationship with Trents Star Bazaar.

Metro AG of Germany has 8 wholesale stores.

The annual retail sale in India is around US $300 billion million. Nearly 90 to 95% of
this is ion the unorganized sector controlled by tiny family run shops or kirana shops.
The organized retail is growing at 20%. The growth is driven by the middle class of
around 300 million. To put the organized retail business in India in perspective, let us
look at the picture in some other countries.

COUNTRIES

RETAIL SALE IN US $

SHARE

BN

ORGANIZED
SECTOR(%)

USA

2983

85

UK

475

80

FRANCE

436

80

CHINA

785

20

PAKISTAN

67

INDIA

322

OF

Source- Financial Times ( 2 December 2011)

1.2 OBJECTIVE OF THE STUDY

This paper tries to understand the role of FDI in multi brand retail in improving the
efficiency of food supply chains in India and its implications for various stakeholders in
the chain. It uses empirical evidence from the experience of Indian domestic retail
supermarkets and wholesale cash n carry supermarkets and from other developing
countries to examine the role FDI can play. The article also examines various
mechanisms which could be used to leverage the presence of FDI in supermarkets and
explores the role of policy and regulation to promote the small farmer and the traditional
retail interests in such chains. It examines the role and implications of FDI supermarkets
for food inflation, farmer income enhancement and employment generations.

1.3 ANALYSIS OF DATA

Until 2011, Indian central government denied foreign direct investment(FDI) in multibrand Indian retail, forbidding foreign groups from any ownership in supermarkets,
convenience stores or any retail outlets, to sell multiple products from different brands
to Indian consumers.
The government of Manmohan Singh, prime minister, announced on 24 November
2011 the following:

India will allow foreign groups to own up to 51 per cent in multi brand retailers, as
supermarkets are known in India, in the most radical pro- liberalisation passed by an
Indian cabinet in years;

Single brand retailers, such as Apple and Idea can own 100 per cent of theirs Indian
stores, up from the previous cap of 51 per cent;

Both multi-brand and single brand stores in India will have to source nearly a third of
their goods from small and medium- sized Indian suppliers;

All multi-brand and single brand stores in India must confine their operations to 53- odd
cities with a population over one million, out of some 7935 towns and citites in India. It
is expected that these stores will now have full access to over 200 million urban
consumers on India;

Multi brand retailers must have a minimum investment of US$100 million with at least
half of the amount invested in back end infrastructure, including cold chains,
refrigeration, transportation, packing, sorting and processing to considerably reduce the
post harvest losses and bring remunerative prices to farmers.
5

CHAPTER 2
2.1 INTRODUCTION TO MODERN RETAIL

BARTER SYSTEM
WEEKLY MARKET
KIRANA STORES
GOVERNMENT STORES
SUPER MARKETS, HYPER
MARKETS, MALLS.

2.2 FDI AND INDIAN ECONOMY

With the tripling of the FDI flows to EMEs during the pre-crisis period of the 2000s,
India also received large FDI inflows in line with its robust domestic economic
performance. The attractiveness of India as a preferred investment destination could be
ascertained from the large increase in FDI inflows to India, which rose from around
US$ 6 billion in 2001-02 to almost US$ 38 billion in 2008-09. The significant increase
in FDI inflows to India reflected the impact of liberalization of the economy since the
early 1990s as well as gradual opening up of the capital account. As part of the capital
account liberalization, FDI was gradually allowed in almost all sectors, except a few on
grounds of strategic importance, subject to compliance of sector specific rules and
regulations.
The large and stable FDI flows also increasingly financed the current account deficit
over the period. During the recent global crisis, when there was a significant
deceleration in global FDI flows during 2009-10, the decline in FDI flows to India was
relatively moderate reflecting robust equity flows on the back of strong rebound in
domestic growth ahead of global recovery and steady reinvested earnings (with a share
of almost 25 per cent) reflecting better profitability of foreign companies in India.
However, when there had been some recovery in global FDI flows, especially driven by
flows to Asian EMEs, during 2010-11, gross FDI equity inflows to India witnessed
significant moderation. Gross equity FDI flows to India moderated to US$ 20.3 billion
during 2010- 11 from US$ 27.1 billion in the preceding year.

2.3 ADVANTAGES OF FDI IN RETAIL

FDI is the best way of investment in developing countries like India. It increases the
capital investment, growth rate of the country.

It brings competition between different companies producing/ selling same type of

products/ brands which will lead to availability of variety of similar products at suitable
price hence it is in general welfare of consumers.

In addition, larger space for product display, hygienic environment in the shopping area,
availability of a large number of products under one roof, and better customer care will
increase customer satisfaction.

India will get a proper storage system of the vegetables and fruits with the help of this
FDI. It give farmers good amount for their produce and increase their productivity with
help of new technology. Farmers will get better price because their products will
directly get purchased by the MNCs as intermediaries will get cut down.

The distribution system and logistics will also get improved with the improvement in
the technology. It is officially found that almost 25% of the product get wasted in
distribution and logistics.

2.4 DISADVANTAGES OF FDI IN RETAIL

FDI in retail will have an adverse impact on the traditional unorganized retail which is
currently more dominant. It will affect very badly the local kirana stores, local markets,
etc. who earn their daily livings because of this.

It will also harm employment in India as lot of foreign players will be purchasing the
products directly from the main supplier. This will harm the intermediaries of the
system.

Lifestyle of Indian consumer will be changed lot. Consumption pattern and adoption of
foreign culture up to a certain extent will change or have an impact on Indian culture.
Certain Indian brands may start losing its importance. As similar kind of product will be
available in a foreign brand, consumers will long to buy foreign brand product. The
players in the organized sector constantly try to outdo their rivals with softer prices,
attractive discounts, and better services. All these work to the advantage of the Indian
Consumers, particularly the middle class with scarce means to buy.

2.5 EMPLOYMENT UNDER EXISTING RETAIL SYSTEM

1. FARM LABOURS:- India is agriculture country. Indias total intake of agricultural
products is far more than the total amount we export. It has been trend in villages that
the farmers legacy is followed by his son and he should also become a farmer. The
profit earned by selling the farm products is the mode for their livelihood. So whatever
may be their monthly income it is one of the employment. The labour appointed for
working in farms get the wages for day.
2. BROKERS:- A broker is an independent agent used extensively in some industries. A
broker's prime responsibility is to bring sellers and buyers together and thus a broker is
the third-person facilitator between a buyer and a seller. An example would be a real
estate broker who facilitates the sale of a property. Brokering is one of the mode of
earning income in todays world.
3. TRANSPORTERS:- The raw materials or finished goods must be available to common
man by transportation facility. The drivers is type of employment where he has to drive
the vehicle and take goods wherever they are demanded.
4. SHOPKEEPERS:- Shop is the place where we may the finished products. Shop may be
of any commodity. The shopkeepers get the income by selling the commodity from the
shops. It is one type of employment for those who have special interest in selling.
AFTER MNC TAKEOVER:
1. All works in farm by machine under corporate farming.
2. Automatic transfer and packing by machines.
3. Sale to customers through chain of departmental stores.
4. Large number of self employed to become unemployed.
10

2.6 SWOT ANALYSIS OF MULTI RETAIL MARKET IN INDIA

STRENGTHS:
The Indian Retail market contributes to very fair share of the Indian Gross Domestic
Product by accounting for about twenty two per cent its total value. The Indian retail
market, as opposed to the retail market in several developed countries, is very
unorganized. Organized retail in India has been a recent phenomenon. Unorganized
retailing in India accounts for about ninety five per cent of the total retail market in
India, leaving out an infinitesimal share close to five per cent to organized retailing.
Unorganized retail, high and low, is a source of livelihood for millions in India. Due to
its unorganized nature, Indian retail market can be said to be a boon for the illiterate and
the semi-literate in India. Unorganized retailing, unlike the service sector and the
manufacturing sector, which demand a decent amount of skills, requires modicum or
little skill. It has been providing a means of livelihood to millions of illiterate people
living across the country as it employs in the range four to eight per cent of the Indian
population, standing second only to agriculture, in which over a half of the Indian
population is engaged. Recent estimates suggest that nearly forty million eke out a
living out of unorganized retailing. Further, unorganized retailing stands in good stead
of many unemployed as it negatives the impact of a downturn in growth of the
manufacturing sector and the unemployment problems that trouble farmers during the
lean season. It accommodates the unemployed labour force in the manufacturing and the
agriculture sectors with means to survive.

11

WEAKNESS:

Indian retail market is heavily fragmented. As noted prior, a lions share of

its market is unorganized. In developed nations, the retail markets are sorely
organized. In the United States, eighty per cent of the retail trade is organized. In
Malaysia, fifty per cent of the trade is organized. In the United Kingdom, France and
Germany, over eighty per cent of the trade is organized. In China, the retail market is
increasingly become organized.

India loses out on the amount of tax it would otherwise accrue, on the
account of organized retailing. The present super markets, established under
the Shops and Establishments Act, are licensed retailers and pay taxes. On
the flipside, retailers in the unorganized sector do no keep tabs on their
transactions. The recent Economic Survey 2011-12 bore out the argument
that the traditional retailers in the unorganized sector have low tax
compliance and that foreign investment may bring more tax compliance in
retail sector.

12

OPPORTUNITIES:

Foreign investment in the multi-brand retail trade is bound to bring in a multitude of

benefits. Foremost, the amount of tax receipts is certain to soar. It is known that as the
retailing would progressively become organized, the receipt of the sales tax shall move
up. In India, unorganized retailers are often frowned upon as they make a dent in the tax
receipts. With organized retailers who record every transaction entering the fray, the
amount of tax receipts may go up.

Second, foreign investment would create umpteen employment opportunities. In

Mexico, Wal-Mart was successful in creating a galaxy of jobs. Within a short period of
its entry into Mexico, it employed about 2, 09, 000 people, the maximum of any private
retailer. 40 In China, Wal-Mart operates about 352 stores in 130 cities.41 It employs
thousands of Chinese people and is registering an average annual growth of eighteen per
cent. In the United Kingdom, where Wal-Mart was successful, it created elephantine job
opportunities.

Poverty in India is so entrenched that it kills lakhs of Indians and millions of children
in India are under-fed for want of food.52 India has been battling hunger from ages. The
Government is now apparently intent on waging a battle against food insecurity. It
drafted the Food Security Bill,2011 and promises 7 kilograms of rice to every priority
household. 53Budgetary allocations were always an impediment to enforce this Bill as
the cost to procure wheat and rice is very high. With foreign players investing in the
back-end infrastructure, the agricultural output is harnessed to the fullest.

13

THREATS:

A perceived threat on allowing foreign investment is loss of livelihood to many people

in the unorganized sector. Indeed, in the decade that Wal-Mart began its operations in
full swing, 31 super market chains declared themselves bankrupt in the United States of
America. Of these, 27 ascribed their bankruptcy to the operations of Wal-Mart.56In
Thailand, within no time; Wal-Mart was able to reduce the share of the unorganized
retail by over 14%. In countries like Mexico, China, and United Kingdom, Wal-Mart
had a corrosive impact on the local traditional retailers. In India, following the
expansion of the Indian retail players, sales in the traditional outlets and the footfalls
reportedly took a slump. In Bangalore, the worst-hit place for its deep super-market
penetration, and places like Ahmadabad, Chennai and Chandigarh, traditional stores
were said to have lost an income of 20-30%.57. An International Research
Organization, ICRIER, commissioned by a Committee of the Indian Parliament
confirmed that sales in the traditional abated by reasons of an expanded-retailing.

14

2.7 POLICIES

It will lead to closure of tens of thousands of mom-and-pop shops across the

country and endanger livelihood of 40 million people.

It may bring down prices initially, but fuel inflation once multinational companies
get a stronghold in the retail market.

Farmers may be given remunerative prices initially, but eventually they will be at
the mercy of big retailers.

Small and medium enterprises will become victims of predatory pricing policies
of multinational retailers.

It will disintegrate established supply chains by encouraging monopolies of global

retailers.

15

2.8 CONCERNS
It will cut intermediaries between farmers and the retailers, thereby helping them get
more money for their produce:

It will help in bringing down prices at retail level and calm inflation.

Big retail chains will invest in supply chains which will reduce wastage,
estimated at 40 per cent in the case of fruits and vegetables.

Small and medium enterprises will have a bigger market, along with better
technology and branding.

It will bring much-needed foreign investment into the country, along with
technology and global best-practices.

It will actually create employment than displace people engaged in small stores.

It will induce better competition in the market, thus benefiting both producers and
consumers.

16

2.9 INDIAN RETAIL REFORMS ON HOLD

According to Bloomberg, on 3 December 2011, the Chief Minister of the Indian
state of West Bengal, Mamata Banerjee, who is against the policy and whose Trinamool
Congress brings 19 votes to the ruiling Congress party led coalition, claimed that Indias
government may put the FDI retail reforms on hold until it reaches consensus within the
ruiling coalition. Reuters reports that this risked a possible dilution of the policy rather
than a change of heart. India Today claimed that the resistance to Indian retail reforms is
primarily because it has been badly sold, even though it can help fix the exploitation of
Indian farmers by the decades-old arhtiya and mandi monopoly system. India
Today claims the policy is good for the small Indian farmers and the Indian consumers.
Pratap Mehta, president of the Centre for Policy Research, claimed any U-turn or
postponement of retail reforms will cause an immense loss of face to the Congress- led
central government of Manmohan Singh. The consumer of India wants the reforms. The
government has already annoyed those who oppose change and innovation in retail. By
putting retail reforms on hold, the government will additionally alienate much larger
segment of Indias population supporting FDI. So they will now have the worst of both
worlds, claims Mehta.
Deepak Parekh, Ashok Ganguly and other economic policy leaders of India, on 4
December 2011, called placing investment and innovation in retail on hold for the sake
of vested interest as unfair and detrimental to vast majority in India. They urged
farmers, consumers and the common people to raise their voice against this false drama
of apprehension against investment and modernising trade in organised retailing. They
called upon Indians to come out and strongly support progressive measures and reforms

17

with the same spirit and gusto with which we take the liberties to criticize policies or
issues we do not appreciate.
Several newspapers claimed on 6 December 2011 that India parliament is expected
to shelve retail reforms while the ruling . Congress party seeks consensus from the
opposition and the Congress partys own coalition partners. Suspension of retai*l
reforms on 7 December 2011 would be, the reports claimed, an embarrassing defeat for
the Indian government, suggesting it is weak and ineffective in implementing its ideas.
Anand Sharma, Indias Commerce and Industry Minister, after a meeting of all
political parties on 7 December 2011 said, The decision to allow foreign direct
investment in retail is suspected till consensus is reached with all stakeholders.

18

2.10

SOCIAL IMPACT AND CONTROVERSY WITH RETAIL

REFORMS
The November 2011 retail reforms in India have sparked intense activism, both in
opposition and in support of the reforms.
2.10.1 Controversy over allowing Foreign retailers
Critics of the Indian retail reforms announcement are making one or more of the
following points:

Independent stores will close, leading to massive job losses. Wal-Mart employs very
few people in the United States. If allowed to expand in India as much Wal-Mart has
expanded in the United States, few thousand jobs may be created but million will be
lost.

Wal-Marts efficiency at supply chain management leads to direct procurement of goods

from the supplier. In addition to eliminating the middle man, due to its status as the
leading retailer, suppliers of goods are pressured to drop prices in order to assure
consistent cash flow.

The small retailer and the middle man present in the retail industry play a large part in
supporting the local economy, since they typically procure goods and services from the
area they have their retail shops in. this leads to increased economic activity, and wealth
redistribution. With large, efficient retailers, goods are acquired in other regions, hence
reducing the local economy.

India doesnt need foreign retailers, since home grown companies and traditional
markets have been able to do the job.

Work will be done by Indians, profits will go to foreigners.

19

Supporters claim none of these objections has merit. They claim:

Organized retail will need workers. Wal-Mart employs 1.4 million people in United
States alone. With United States population of about 300 million, and Indias population
of about 1200 million, if Wal-Mart like retail companies were to expand in India as
much as their presence in the United States, and the staffing level in Indian stores kept
at the same level as in the United States stores, Wal-Mart alone would employ 5.6
million Indian citizens. Wal-Mart has a 6.5% market share of the total United States
retail. Adjusted for this market share, the expected jobs in future Indian organized retail
would total over 85 million. In addition, millions of additional jobs will be created
during the building of the maintenance of retail stores, rods, cold storage centres,
software industry, electronic cash registers and other retail supporting organizations.
Instead of job losses, retail reforms are likely to be massive boost to Indian job
availability.

KPMG- one of the worlds largest audit companies- finds that in China, the employment
in both retail and wholesale trade increased from 4% in 1992 to about 7% in 2001, post
China opening its retail to foreign and domestic innovation and competition. In absolute
terms, China experienced the creation of 26 million new jobs within 9 years, post China
announcing FDI retail reforms. Additionally, contrary to some concerns in China , post
retail reforms, the number of traditional small retailers also grew by 30% over 5 years.

India needs trillions of dollars to build its infrastructure, hospitals, housing and schools
for its growing population. The Indian economy is small, with limited surplus capital.
The government is already operating on budgets deficit deficits. It is simply not possible
for Indian investors or the government to fund this expansions, job creation and growth
at the rate India needs. Global investment capital through FDI is necessary. Beyond
capital, the Indian retail industry needs knowledge and global integration. Global retail
20

leaders, some of which are party owned by people of Indian origin, can bring this
knowledge. Global integration can potentially open export markets for Indian farmers
and producers. Wal-Mart, for example, expects to source and export some $1 billion
worth of goods from India every year, since it came into Indian wholesale retail market.

The Pepsi and Coca-Cola example is meaningless in the context of Indian beverage
market. More competition is lacking because of limited demand. Indian consumer has
limited interest in soft drinks. Soft drinks represent less than 5% of Indian beverage
market. Indian consumers prefer milk-based, tea and coffee and these account for90%
of

Indian

beverage

market,

with

plenty

of

competition

domestic

brands

and even European brands like Nestl. The next most important market in India is
bottled water, which outsells the combined soft drink sales of the Pepsi and Coca-Cola.
Organized retail too will have numerous brands and strong competition.

Indian small shops employ workers without proper contracts, making them work long
hours. Many unorganized small shops depend on child labour. A well-regulated retail
sector will help curtail some of these abuses.
2.10.2 Opposition to Retail Reforms

Within a week of retail reform announcement, Indian government has faced a political
backlash against its decision to allow competition and51% ownership of multi-brand
organized retail in India.

Despite the fact that Salman Khurshid, Indias law minister, claiming that many
opposition

parties,

including

the

Bharatiya

Janata

Party,

had

privately

encouraged the government to push through the retail reform, the intense criticism now
targets Congress-led coalition government, and its decision to push through one of the

21

biggest economic reforms in years for India. Opposition parties claim supermarket
chains are ill-advised, unilateral and unwelcome.

On 1 December 2011, an India-wide "bandh" was called by political parties opposing

the retail reform. While many organizations responded, the reach of the protest was
mixed. The Times of India a national newspaper of India, claimed people appeared
divided over the bandh call and internal rivalry among trade associations led to a mixed
response, leaving many stores open day-long and others opening for business as usual in
the second half of the day. Even Purti Group, a network of stores owned and operated
by Nitin Gadkari were open for business, ignoring the call for bandh. Gadkari is the
president of BJP, the key party currently organizing opposition to retail reform.
2.10.3 Support from Retail Reforms
In a pan-Indian survey conducted over the weekend of 3 December 2011, overwhelming
majority of consumers and farmers in and around ten major cities across the country
support the retail reforms. Over 90 per cent of consumers said FDI in retail will bring
down prices and offer a wider choice of goods. Nearly 78 per cent of farmers said they
will get better prices for their produce from multi-format stores. Over 75 per cent of the
traders claimed their marketing resources will continue to be needed to push sales
through multiple channels, but they may have to accept lower margins for greater
volumes.
2.10.3.1 Farmer Group
Various farmer associations in India have announced their support for the retail reforms.
For example:
1. Shriram Gadhve of All India Vegetable Growers Association (AIVGA) claims his
organization supports retail reform. He claimed that currently, it is the middlemen
22

commission agents who benefit at the cost of farmers. He urged that the retail
reform must focus on rural areas and that farmers receive benefits. Gadhve
claimed, "A better cold storage would help since this could help prevent the
existing loss of 34% of fruits and vegetables due to inefficient systems in place."
AIVGA operates in nine states including Maharashtra, Andhra Pradesh, West
Bengal, Bihar, Chhattisgarh, Punjab and Haryana with 2,200 farmer outfits as its
members.
2. Bharat Krishak Samaj, a farmer association with more than 75,000 members says
it supports retail reform. Ajay Vir Jakhar, the chairman of Bharat Krishak Samaj,
claimed a monopoly exists between the private guilds of middlemen, commission
agents at the sabzi mandis and the small shopkeepers in the unorganized retail
market. Given the perishable nature of food like fruit and vegetables, without the
option of safe and reliable cold storage, the farmer is compelled to sell his crop at
whatever price he can get. He cannot wait for a better price and is thus exploited
by the current monopoly of middlemen. Jakhar asked that the government make it
mandatory for organized retailers to buy 75% of their produce directly from
farmers, bypassing the middlemen monopoly and India's sabzi mandi auction
system.
3. Consortium of Indian Farmers Associations (CIFA) announced its support for
retail reform. Chengal Reddy, secretary general of CIFA claimed retail reform
could do lots for Indian farmers. Reddy commented, India has 600 million
farmers, 1,200 million consumers and 5 million traders. I fail to understand why
political parties are taking an anti-farmer stand and worried about half a million
brokers and small shopkeepers.

23

2.10.3.2 Economists and Entrepreneurs

Many business groups in India are welcoming the transformation of a long-protected

sector that has left Indian shoppers bereft of the scale and variety of their counterparts in
more developed markets.

B. Muthuraman, the president of the Confederation of Indian Industry, claimed the retail
reform would open enormous opportunities and lead to much-needed investment in cold
chain, warehousing and contract farming.

Organized retailers will reduce waste by improving logistics, creating cold storage to
prevent food spoilage, improve hygiene and product safety, reduce counterfeit trade and
tax evasion on expensive item purchases, and create dependable supply chains for secure
supply of food staples, fruits and vegetables. They will increase choice and reduce Indias
rampant inflation by reducing waste, spoilage and cutting out middlemen. Fresh
investment in organized retail, the supporters of retail reform claim will generate 10
million new jobs by 2014, about five to six million of them in logistics alone.

Amartya Sen, the Indian born Nobel prize winning economist, in a December 2011
interview claims foreign direct investment in multi brand retail can be good thing or bad
thing depending on the nature of the investment. Quite often, claims Professor Sen, FDI is
a good thing for India.

2.10.3.3 Allowed in some states, banned in others

The governments of some states, particularly Congress-ruled states have said they will
allow Foreign supermarkets to open in their state:

24

1. Andhra Pradesh, Assam, Haryana, Maharashtra, Kashmir, Manipur, Uttarakhand,

Daman and Diu and Dadra Nagar Haveli, will allow foreign retailers.

Other states, particularly BJP-ruled states have said they will not allow foreign
supermarkets to open in their state, these are:

2. West Bengal, Gujarat, Bihar, Karnataka, Kerala, Madhya Pradhesh, Delhi,

Tripura, Orissa and Rajasthan.

Supporters of retail reform who have voiced the need to promote organized retail
include Chief Ministers of several states of India, several belonging to political
parties that have no affiliation with Congress-led central government of India. The
list includes the Chief Ministers of Maharashtra, Andhra Pradesh, Tamil Nadu and
Gujarat. In a report submitted earlier in 2011, these Chief Ministers urged the
Prime Minister of prioritize reforms to help promote organized retail, shorten the
retail path from farm to consumer, allow organized retail to buy direct from
farmers at remunerative produce prices, and reduce farm to retail costs. Similarly,
the Chief Minister of Delhi has come out in support of the retail reform, as have
the Chief Ministers of the two farming states of Haryana and Punjab in north
India. The Chief Ministers of Haryana and Punjab claim that the announced retail
reforms will never benefit farmers in their states.

2.10.3.4 Current Super Markets

Existing Indian retail firms such as Spencer's, Food world Supermarkets Ltd,
Nilgiri's and ShopRite support retail reform and consider international competition
as a blessing in disguise. They expect a flurry of joint ventures with global majors
for expansion capital and opportunity to gain expertise in supply chain
25

management. Spencer's Retail with 200 stores in India, and with retail of fresh
vegetables and fruits accounting for 55 per cent of its business claims retail reform
to be a win-win situation, as they already procure the farm products directly from
the growers the involvement of middlemen or traders. Spencers claims that there
is scope for it to expand its footprint in terms of store location as well as procuring
farm products. Food world, which operates over 60 stores, plans to ramp up its
presence to more than 200 locations. It has already tied up with Hong Kong-based
Dairy Farm International. With the relaxation in international investments in
Indian retail, Indias Food world expects its global relationship will only get
stronger. Competition and investment in retail will provide more benefits to
consumers through lower prices, wider availability and significant improvement in
supply chain logistics.

26

CHAPTER 3
3.1 RECOMMENDATIONS
As India grows, driven by its success in information technology and services, there is
another revolution waiting to happen in the Retail sector dependent on whether the
Government of India can unshackle the various inefficiencies that are keeping this
industry constrained. Retail in India is estimated at nearly US$ 400 billion and is
growing at a CAGR of 9 per cent. 96 per cent of this sector remains unorganized and
constitutes at work force that have taken to self- employment for daily subsistence due
to an overcrowded agriculture sector and lack of employment opportunities for lesser
skilled workers in the manufacturing or services sector. Food and groceries form nearly
60 per cent of Indias retailing followed by, among others, clothing and footwear at a
distant 9 per cent of retail. Despite the size of this market, retail and its food supply
chain remains unorganized and inefficient. A lack of investment, technology and
process control in the agriculture supply chain leads to tremendous waste accounting for
nearly 25-30% of fruits and 10% of grains produced. Also, the related and supporting
industries for food processing, cold chains and crafts remain nascent. In a frim reflection
on the situation, a politician in India recently remarked that India recently remarked that
Indian consumers buy shoes in air-conditioned stores but food on the streets. Despite
this scathing but accurate comment, the debate on whether to organize retail remains
unresolved. This debate is further complicated by intellectual and political debate on the
impact of Foreign Direct Investment, by large international retailers. Interestingly, both
these question have been on the table of policy makers in India for more than 15 years
and the Government has so far only allowed some FDI in single-brand retailing and
wholesale trading of retail goods. While the incumbent Congress party led
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Government has voiced many reasons to organize retail and allow FDI in multi-brand
retailing, public opinion in response to a discussion paper released by the Department of
Industrial Policy and Promotion (DIPP)- Ministry of Commerce and Industry- has been
negative. In my quest to decipher whether India should organize and allow FDI in multi
brand retail. I have analysed all the opinions received by the DIPP. I posit that the data
is skewed and not sufficient to form the basis of a policy decision. I have also conducted
an extensive literature review on the impact of Wal-Mart on small retailers to
understand the potential impact it can have on India.

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3.2 CONCLUSION
As far as organized sector is concerned there should be regulatory framework. On the
one hand, because of penetrating pricing and because of the fact that it definitely creates
monopolistic market and because it has potential to create loss to crores of families,
which will occur to unorganized sector. FDIs shall not be allowed in Retail sector.
Whereas, on the other hand, the concept of global village forces the theme of
liberalization. By closing door of your home, world outside will not stop from up
gradation. Accepting changes and challenges is the truth of life. Food retailing supply
chain is required to be improved and it is need of an hour to adapt the technology. It is
right time to invite FDI when USA and Europe are under crisis and India is on the verge
of facing heat of inflation.
Backing efficiency of the system at a cost of potentially social disruptive policy is
the main concern. As a countryman I hope for the best but at last
its all about natures law: Survival of the Fittest!

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3.3 REFERENCE

Harper, Douglas. "retail". Online Etymology Dictionary. Retrieved 2008-03-16.

Time, Forest. "What Is Soft Merchandising?" Houston Chronicle. Retrieved 22

May2014.

Mohammad Amin (2007). Competition and Labour Productivity in Indias

Retail Stores.

Krafft, Manfred; Mantrala, Murali K (2006). Retailing in the 21st Century:

Current and Future Trends. New York.

Multichannel Group - company focused on R&D in Multichannel Marketing.

Kock, Stefan (2010): "Chancen und Risiken von Brick&Click: Multi-ChannelMarketing im Bekleidungseinzelhandel", Germany, Igel Verlag.

Bloomberg BusinessWeek. 16 September 2010.

Anand Dikshit (12 August 2011). "The Uneasy Compromise - Indian Retail". The
Wall Street Journal.

"FDI in multi-brand retail comes into effect; way clear for Wal-Mart". The
Economic Times. 20 September 2012

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