Wednesday, November 23, 2011

FDI in retail sector

After partially opening up the retail sector to FDI (upto 49% ownership along with an Indian firm as a joint venture) few years back amidst heavy opposition, India is now looking to let the retailers to start their independent investments (upto 51% ownership under their name) on Indian soil. This is a huge move considering Walmart and Tesco have been waiting on the sidelines for a really long time. To an average consumer like me, what will this translate to?

  1. A huge increase in the investment on the retail sector and all the mom - pop store will go out of business very soon.
  2. A very refined and efficient supply chain will be put into place. All these companies will help the Indian retailers learn more about supply chain management on a larger scale. Indian dont have a single stop store at the national level that we can boast about, so this will lead to a big players like Bharati, Reliance compete or do a joint venture with these retail behemoths (we already have Bharati - Walmart ventures operating in India under Bharati's storefront)
  3. The farmers who will directly supply to these giants will stand to gain, considering the fact all the middle men will run out of business. This could potentially also reduce the price on the products, but only marginally. This also opens up a new problem, all these farmers without proper representation will also get exploited and end up without a choice.
  4. Consumers will also stand to gain, with wide selection  and single shop points. They will also be spoilt for choice. 
  5. All these big players will want big real estate to set shop which are currently available only in the outskirts of any city. This will drive the real estate price of those areas northwards and there by making a dream of owning a house still a dream for the middle class.
  6. Increased job opportunities for the unemployed youth.
It is all quite exciting and interesting, at the same time, it has also made me skeptical to the point that, we never know what is in store until we really experience. There is an interesting article about Walmart's foray into the Chinese market which more or less mirrors what you can expect from these retail giants in India. But it needs to be taken with a pinch of salt as China is light years ahead in industrialization and agro progress, not without problems though. If we are to believe the rumors, it is an interesting development on the retail front in India, this could potentially change the face of Indian Retail, which only time can answer.

2 comments:

_rootnode said...

We don't have a one stop shore?
Really?
what abt the likes of saravana stores and big bazar? it satisfies every household need.
and no middle men/agents - that actually is a bigger problem than what it may seem now.
removing them from the picture actually means burning a hole in the politicians pocket. Kastam dhan.
light'a bayama dhan iruku.
all this happening at this moment, with euro debt and all..
Hopeful
~cheers.!

Sriram Kannan said...

Can't wait to see 'em in India. Hope things turn out for the better future.