FDI in Retail

With the government announcing FDI in retail, views and counter views on the decision has been floating around. Skeptics say it will lead to hundreds of job losses, kill domestic retail. Those in favor of the proposal say farmers will get better pay for their produce; there would less wastage of food and consumers better price.  I am not sure about the facts and figures behind this. In the past few years FDI in retail was disallowed to help domestic brands like Food Bazaar, More, Reliance Fresh to mushroom. I think enough time was given to them to help them strengthen their position.

Having lived abroad I can convincingly say that the Indian retail outlets are offering a substandard service. The quality of vegetables sold in outlets of More, Spencer and Food Bazaar is far from international standards. I often see vegetables and fruits kept without proper refrigeration. The vegetables are not cleaned. Potatoes and ginger carry mud. Quality of vegetables is far from being called good. Also I don’t see any price benefit to the consumer. I prefer buying vegetables from the local vendor, who offers fresh and better quality vegetables at the same price.

The Indian retail outlets have not benefitted the consumers, I am not sure if they have benefitted the farmers. I don’t think they would have. I personally want FDI in retail so that the local players are made to sit up and improve their service. Most of these global chains survive on wafer thin margins, and volumes drive growth. They are able to offer services at cut throat prices through excellent supply chain management. I am sure these giants will cut out the middlemen from the scene.  So the consumers will definitely benefit. Technically speaking the farmers should also benefit and they will get a direct link to the consumer. Farming is a lucrative profession in the western world because of this.  The other benefit will be reduction in food wastages. These giants have deep pockets to invest in cold storage facilities and have effective transportation logistics in place.

Coming to the negative side, critics say it will kill the local Kirana stores and also render middlemen jobless. The fear about Kirana stores is unfounded; they survived all these years and coped well with the influx of Food Bazaars, More etc. The key to the success of Kirana stores lies in their personal touch. They are much localized, present in residential colonies, provide service on call & deliver products at the convenience of your home. Next is the middlemen, they losing their jobs could be true as the service is unnecessary fat in the existing supply chain. This fat can be skimmed. Let’s not forget the jobs that these giants will create in the whole supply chain management space.

I believe this is a good step for the benefit of consumers and farmers.