ADVANTAGES OF 51% FDI IN MULTI BRANDED RETAIL

 The Indian retail market is estimated to be US$ 450 billion and one of the top five retail
markets in the world by economic value. FDI in Multi Brand retail implies that a retail
store with a foreign investment can sell multiple brands under one roof.

 Opening up FDI in multi-brand retail will mean that global retailers including Wal-Mart,
Carrefour and Tesco can open stores offering a range of household items and grocery
directly to consumers in the same way as the ubiquitous ’kirana’ store.

 One of the main arguments in favor of the decision to allow FDI in multi-brand retail is
develop efficient supply chains minimize losses arising out of inadequate storage
facilities ineffective equipment and the lack of an effective backend network.

 “In recent years 1.83 tons of wheat, 3.95 lakh tons of rice, 22,000 tons of paddy and a
huge no of tons of maize was wasted in the damaged in the various godowns of the Food
Corporation of India (FCI).” The government acknowledges that food worth nearly Rs.
60,000 crore is destroyed every year due to poor and insufficient storage facilities. This
lost food is keeping millions of Indians hungry.

 To add insult to injury, the government spends about Rs 2.6 crore of the tax payers’
money to get rid of food grain that has rotted during storage. FDI in retail is touted as the
panacea for all ills. It is expected that FDI will also help build the necessary distribution
infrastructure and bring in better technology.

 The share of organized retail to total retail trade in India is hardly 5% against 66% in
Japan, 30% in Indonesia and 20% in China. It is high time for India to allow FDI in all
possible categories to bring more competition in the market and reduce the gap between
farm-to -fork price differential.

 On the issue of prices, it is quite possible that benefits that will accrue from removing the
middlemen will be shared by farmers, consumers and the retailers. Farmers will benefit in
the form of higher prices for their produce, while consumers will benefit in the form of
lower prices.

 3–4 million new direct jobs and around 4–6 million new indirect jobs in the logistics
sector, contract labor in the distribution and re-packaging centres, housekeeping and
security staff in the stores.
INDIAN AIRLINE INDUSTRY IN TURBULENCE

Country's largest private air carrier Jet Airways today posted a net loss of Rs 713.60 crore for the
second quarter of 2011-12, due to high prices of aviation turbine fuel and a depreciating rupee.
The airline had a net profit of Rs 12.40 crore in the corresponding period of the 2010-11 fiscal.

"The quarter's results have been adversely impacted due to high ATF prices and a steep decline
in the value of rupee against the US Dollar. The airlines have been progressively increasing the
fare to pass on the rising input cost including the cost of ATF," Jet Airways said in a filing to the
BSE.

Total income of the company during the period increased to Rs.3,293.54 crore, from Rs.3,067.62
crore in the comparable period, it said.

Further, during the half-year ended September 30, 2011, the airline reported a net loss of Rs
836.76 crore against a net profit of Rs 15.92 crore in the year-ago period.

The civil aviation minister sought to cool a crisis over debt-hobbled Kingfisher Airlines on

Friday as investors bailed out, alarmed by scores of flight cancellations and reports that its
leasing firms wanted their planes back.

Named after the country's most-famous beer, Kingfisher has climbed to become India's No. 2
private carrier since it began operations in the heady days of 2005 as the economy was booming
and forecasts for passenger growth reached for the skies.

But it has become one of the main casualties of high fuel costs and a fierce price war between a
hand ful of airlines which, between them, have ordered hundreds of aircraft for delivery over the
next decade in a long punt on the future.

The Centre for Asia Pacific Aviation (CAPA) has forecast a record $2.5-$3 billion loss for
Indian airlines for the year ending March 2012, with state-run Air India alone likely to account
for more than half of it.

As shares in Kingfisher slumped 18 percent on Friday to their lowest level since it was launched
by the flamboyant liquor baron Vijay Mallya, Civil Aviation Minister Vayalar Ravi said he
would approach the finance minister to seek emergency bank assistance for the cash-strapped
company.
POST BUDGET GOLD PRICE HIKE IN INDIA

A war against gold?

The further hike in import duty by the Finance minister will surely have an adverse effect on the
development of gold market in India. The customs duty has been increased to 4% (from 2%
prevailing previously) which is actually double of the previous levy and comes after nearly an
equal hike that took place in January earlier this year. Duty increases have been on a spree since
July 2009 when the reform process for gold markets was reversed. The duty increases currently
total to a whopping increase of more than 10 times.

Will this serve the purpose?

Most probably not! It is doubtful whether these steps would have much impact on the buying
behavior beyond the short term. The price sensitive Indian consumer may refrain from buying in
the short term since there is a sentiment impact of a sudden increase in price owing to the duty
added to already prevailing high prices.

Prices have been trending upwards over the past few years. However, even significant price rises
over the past few years have not dithered consumers from purchasing more gold. Rather, there
has been record consumption despite these price hikes. And hence a 2% increase in duty may not
have much impact on consumption patterns.

The real story

Even in the past, policymakers have tried to discourage gold consumption but India’s affinity
towards gold still holds strong. There have been a variety of measures adopted towards
restricting gold consumption, right since our Independence. However, all these measure have
met with little success. Thus, it is strange that the government should avoid addressing the
underlying issues that drive gold consumption, and rather attempt to dissuade development of
gold market in India in totality. The duty increases would probably help fill government coffers,
but it’s unlikely that it would have any other significant impact on the demand of gold.

The side effects

Going back to times when customs duty was significantly high, a major portion of gold
consumed used to come by way of smuggled imports. There has been a continuous increase in
duties during the last 3 years but it is still low as compared to what used to prevail when a large
portion of gold requirement was obtained through unofficial channels.
What the government should do ideally?

Policymakers need to understand the reasons that drive people to gold. The most obvious is lack
of banking / financing innovation / facilities in the rural areas where the major consumption
happens. In these areas, it is gold that provides the needed liquidity. Also, inflation in India has
been on a higher side often driving real interest rates in a negative territory. Owing to these
reasons Indians have stayed loyal to their gold consumption habit.

Government should ideally work on measures such as promoting financial inclusion and
understanding the financial needs and requirements of the rural masses, providing for social net
that helps reduce uncertainty and aim at keeping inflation under control. Confidence through
such measures can alter the saving habits and policymakers should ideally work towards that
rather than move towards discouraging consumption.