FDI in Retail

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Abhijeet
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Re: FDI in Retail

Postby Abhijeet » 02 Jan 2012 18:02

Can foreign retailers solve world hunger, end all wars, and tie your shoelaces? The answer is clearly NO, so they are useless and should be kept out.

Indian retailers, meanwhile, can do all of the above.

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Re: FDI in Retail

Postby Dhiman » 03 Jan 2012 00:03

Abhijeet wrote:Can foreign retailers solve world hunger, end all wars, and tie your shoelaces? The answer is clearly NO, so they are useless and should be kept out.

Indian retailers, meanwhile, can do all of the above.


My point was that if you want to stop wastage and pilferage of farm produce, then you need to invest in infrastructure that would prevent wastage and pilferage of farm produce but not in multi-brand retail. FDI in multi-brand retail is not going to magically stop wastage and pilferage of farm produce.

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Re: FDI in Retail

Postby Theo_Fidel » 03 Jan 2012 00:47

Meanwhile...

http://www.thehindubusinessline.com/opi ... 769198.ece

A closer analysis also brings out a fundamental difference between mandis and private procurement channels. For instance, since ITC necessarily operates its choupals according to the corporation's changing business strategy, its procurement volumes change from season to season, and in some years may barely make an appearance in a particular market. Choupals also essentially function as post-harvest buying locations, procuring a single commodity at a time on the basis of variety and quality specifications. What is true for ITC is also true for government wheat procurement operations, which are limited in duration and location, and vary in volume. In contrast, the mandi stands out as the only physical marketplace currently open to all farmers around the year, dealing simultaneously with the sale of multiple commodities of variable quality by bringing together a range of licensed buyers of different sizes in an open auction.

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Re: FDI in Retail

Postby Abhijeet » 03 Jan 2012 01:01

Dhiman wrote:My point was that if you want to stop wastage and pilferage of farm produce, then you need to invest in infrastructure that would prevent wastage and pilferage of farm produce but not in multi-brand retail. FDI in multi-brand retail is not going to magically stop wastage and pilferage of farm produce.


That's debatable, since "farm to fork" models will have an interest in minimizing wastage at the production end.

In any case, it's nobody's argument that allowing FDI in retail means that other reforms should not happen. Why confuse the issue by saying that rather than x happening, y should happen when it is clearly not an either-or choice?

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Re: FDI in Retail

Postby Dhiman » 03 Jan 2012 01:48

Abhijeet wrote:
Dhiman wrote:My point was that if you want to stop wastage and pilferage of farm produce, then you need to invest in infrastructure that would prevent wastage and pilferage of farm produce but not in multi-brand retail. FDI in multi-brand retail is not going to magically stop wastage and pilferage of farm produce.


That's debatable, since "farm to fork" models will have an interest in minimizing wastage at the production end.

In any case, it's nobody's argument that allowing FDI in retail means that other reforms should not happen. Why confuse the issue by saying that rather than x happening, y should happen when it is clearly not an either-or choice?


That is not an argument that I invented, but something that seems to be quoted widely in media for allowing FDI in retail. I am marely countering the argument. FDI in retail doesn't bring in anything that is already not there and wonn,t bring in anything that is missing.

Multi-brand big retail already exists in India, so what benefit will foreign once bring in besides an additional source of bribe money for govt. babus?

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Re: FDI in Retail

Postby Abhijeet » 03 Jan 2012 10:58

More competition and capital in a sector that needs both. Anyway, round and round we go...

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Re: FDI in Retail

Postby Dhiman » 03 Jan 2012 11:23

Abhijeet wrote:More competition and capital in a sector that needs both. Anyway, round and round we go...


What good is more competition in retail when infrastructure is missing. I would put whatever money that is available (including FDI) into infrastructure rather than in fancy retail outlets that no one needs anyway :D

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Re: FDI in Retail

Postby member_21708 » 07 Jan 2012 21:43

100% FDI in single brand retail to be notified soon: Govt

The government may soon notify 100% foreign direct investment in single-brand retail, paving way for global chains like Adidas, Nike, Louis Vuitton, Hermes and Gucci to have full ownership of their India operations.

"Soon", said Secretary in the Department of Industrial Policy and Promotion (DIPP) PK Chaudhery, when asked today about the notification of 100 per cent FDI in single-brand retail.


Presently, for single brand retailers,51 per cent FDI is permitted. Removal of investment cap would help global fashion brands especially from Italy and France to strengthen their interest in the growing Indian market.

Most of the big names have already set up their operations in the country with joint ventures with Indian partners. The new policy would allow them to buy out the domestic partners.


http://www.dnaindia.com/india/report_10 ... vt_1634194

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Re: FDI in Retail

Postby member_21708 » 07 Jan 2012 22:03

Multi-brand retail FDI to kick in after polls
http://www.financialexpress.com/news/mu ... s/896937/0



‘SMEs hold the key to higher economic growth in future’
‘The prospects of India’s economic growth in the next fiscal (2012-13) depends largely on how the murkier European economy shapes up. For now, however, fiscal deficit needs to be brought down. This is crucial to contain inflation without having to rely on tight money,’ says Pronab Sen, the country’s first Chief Statistician and currently principal adviser to the Planning Commission in an interview to Annapurna Singh of Deccan Herald. The economic woes have only worsened as the latest government data shows the fiscal deficit in the first eight months ballooning to 86 per cent of the full year target. Sen, who is playing a key role in shaping country’s 12th five-year plan, also believes that SME sector holds the key to India achieving high economic growth in coming months. Excerpts:

Investor sentiment is also very low. They are not investing...

Whose sentiments are we talking about? If we are talking about the corporate sentiments, yes, they are down. But the SME small and medium enterprises) sector actually invested more this year than what they did last year. We need to look at their sentiments also. Our entire economic system is banking on corporate sector. If corporates do badly, we think entire economy is doing badly. We forget that we have a vibrant SME sector, which is contributing as much as 40 per cent to the economy. How can you ignore that? We really need to keep track of what is happening in the country and not just be driven by the corporate sector. The real entrepreneurship is in the SME sector. They are exposed to the vagaries of outside world. They will not stop production if Europe or the US goes wrong. They hold the key to higher economic growth in the future.

http://www.deccanherald.com/content/217 ... nomic.html

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Re: FDI in Retail

Postby SBajwa » 08 Jan 2012 07:05

Once again!! FDI in any field should be welcomed for a country with 1/3 of its population living below poverty line.

India has too many middle men who do not add any value to the product between producer and consumer.

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Re: FDI in Retail

Postby SBajwa » 08 Jan 2012 07:07

IAS officer named Manohor Singh Gill decided to allocate a specific area in the cities of Punjab for farmers to bring their produce bypassing all the middle men. Farmers started earning 3-4 times overnight and consumers started getting fresh vegetables. The issue of how to transport produce, milk, perishables to consumers still remains.

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Re: FDI in Retail

Postby member_21708 » 08 Jan 2012 11:07

SBajwa wrote:Once again!! FDI in any field should be welcomed for a country with 1/3 of its population living below poverty line.

FDI is not some sort of charity that will solve India's poverty woes. Infact it might aggravate the problem by limiting choices the poor have by diverting food resources from villages to cities were these mega retailers will be situated. Keep in mind most farm produce is bought and sold at village haats, destruction of these economic structure will lead to mass migration from rural areas to cities increasing congestion and slums in the process.

SBajwa wrote:India has too many middle men who do not add any value to the product between producer and consumer.

Stale propaganda line that gets repeated too often without any economic proof being provided to prove the claim.

SBajwa wrote:IAS officer named Manohor Singh Gill decided to allocate a specific area in the cities of Punjab for farmers to bring their produce bypassing all the middle men. Farmers started earning 3-4 times overnight and consumers started getting fresh vegetables. The issue of how to transport produce, milk, perishables to consumers still remains.

link to support your claims would be welcomed.

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Re: FDI in Retail

Postby Dhiman » 08 Jan 2012 11:31

SBajwa wrote:Once again!! FDI in any field should be welcomed for a country with 1/3 of its population living below poverty line.

India has too many middle men who do not add any value to the product between producer and consumer.


FDI is no excuse for lack of domestic reforms, and bad, absent or corrupt governance which leads to systemic inefficiencies in the system which ultimately give rise to middle men.

By the way, some food for thought: all retail stores are ultimately a form of "middle-man" between consumers and producers.

Theo_Fidel

Re: FDI in Retail

Postby Theo_Fidel » 08 Jan 2012 12:10

SBajwa wrote:IAS officer named Manohor Singh Gill decided to allocate a specific area in the cities of Punjab for farmers to bring their produce bypassing all the middle men. Farmers started earning 3-4 times overnight and consumers started getting fresh vegetables. The issue of how to transport produce, milk, perishables to consumers still remains.


Qualify these sorts of statements.

'Some' farmers benefited and 'some' consumers benefited. I can guarantee vast majority of Indian people did not and will not. Indian farmers get paid above market price for government controlled produce. How will FDI produce a better deal for them?

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Re: FDI in Retail

Postby Singha » 11 Jan 2012 08:02

Govt yesterday notified the rule that grants 100% FDI in single brand retailers.

so any single brand chain can now setup in India with 100% ownership ...

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Re: FDI in Retail

Postby Dhiman » 11 Jan 2012 10:11

Singha wrote:Govt yesterday notified the rule that grants 100% FDI in single brand retailers.

so any single brand chain can now setup in India with 100% ownership ...


Govt certainly knows how to keep themselves busy with frivolous things.

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Re: FDI in Retail

Postby SBajwa » 11 Jan 2012 23:20

Vikramd!! Check this link for you!!

http://mandiboard.nic.in/ach-apni-mandi.htm


Fidel
Qualify these sorts of statements.

'Some' farmers benefited and 'some' consumers benefited. I can guarantee vast majority of Indian people did not and will not. Indian farmers get paid above market price for government controlled produce. How will FDI produce a better deal for them?


Government control prices for grains and not for vegetables and fruits. Transportation of vegetables and fruits (grains too) is restricted across the district and state lines so farmers have to sell their stuff inside their district.

So if there is one giant co-op style store in each district for vegetables, fruits, dairy, meat and processed foods (bakery, juices, cheese, ghee, sweets,etc) where each farmer in that district/tehsil can bring/sell their respective produce to that store (they do transport their current grain to the traders at mandi (which is usually at district/tehsil level)). Thus the big store could be able to

1. Store the products for some time by better storage facilities.
2. Directly market the products to the consumers.

ONCE again the problem is india is that 10-20 million traders (people buying BMWs, Mercedes and Pajeros) have too much political power which 80% of farmers do not have that much.

Foreign direct Investment in food production, retail, storage, transportation should be welcomed by a poor country like India.

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Re: FDI in Retail

Postby SBajwa » 11 Jan 2012 23:24

The problem in India is that too many people are depended upon the farming and thus farming is not mechanized to optimize its produce. Then due to too many people and poverty there ain't enough storage facilities or transportation options.

If I could I would grow vegetables daily in Haryana and transport them either to Chennai, Mumbai or Calcutta (depending upon that day's prices) at my option. Is that possible?

when People in New York get fresh oranges from Florida why can't people in punjab get fresh oranges from nagpur?

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Re: FDI in Retail

Postby amit » 12 Jan 2012 07:54

What India needs is a string of cold storages and fleets of refrigerated trucks to transport non-grain agricultural produce from one part of the country to another. Now that's a kind of investment the GoI will not do and should not do. GoI responsibility is building roads and even though a lot needs to be done, the road connectivity is immeasurably better today than it was 10 years ago.

However, to take advantage of the road network we need massive, super efficient supply chains. People ask what can an international retail chain like Walmart or Carrefour bring to the table which a Big Bazar or Specer's can't? The answer is the supply chain which involves a lot of management skills, much more than just the technology.

Provided the rules are framed right (like ensuring a certain percentage of the procurement is done within India) international chains can change the retail industrial landscape in a same way the entrance of Maruti so many years ago changed our auto industry. Building high skill retail supply chains is no joke and India needs them desperately.

Its criminal that every year we have situations where produce like tomatoes rot in one part of the country due to over production while in another part the prices go through the roof because of a lack of supply. For India's relatively small landmass this is criminal inefficiency.

The massive political opposition to retail is due to the fact that the persons who are really threatened by these supply chains is the middle man. The mandi thekedar who makes 30-40 per cent margins by buying produce from farmers cheap and selling to end users with a massive mark up feels the most threatened. Big retail would go the farmers directly.

This trader class is well-organised and politically well-connected and hence all this hue and cry.

Organised retail is good news for farmer and consumers. It's also in a way good news for small traders as the neighbourhood kiranas will always survive. In fact I've seen shop owners buying in bulk from outlets like Big Bazar. I once saw a guy with a shopping cart full of shampoo of various brands standing in the line. On being asked he said its more convenient and cheaper for him to pick up in bulk from Big Bazar rather than wait for the sales man to make an appearance at his shop every 15 days or so.

Somehow the fear of big retail reminds me of the fear of computers in GoI offices and banks. Left unions used to say all jobs would be gone once computers came in. Similarly we now hear the cry that thousands of little businessmen will be out of jobs. How about the thousands of low skilled workers who are getting jobs in these retail outlets. Remember for every sales assistant you see in a shop there's probably three more in the back end working in the supply chain. These are the folks whom the BPO wave have left behind and folks who can't get blue collar jobs because industrial activity never took off due to the labor laws. Many are first generation in their families who have regular jobs.

With progress the nature of jobs change, the number of jobs doesn't go down. That's something we Indians never understand, until it's shoved down our throats.

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Re: FDI in Retail

Postby amit » 12 Jan 2012 08:09

SBajwa wrote:If I could I would grow vegetables daily in Haryana and transport them either to Chennai, Mumbai or Calcutta (depending upon that day's prices) at my option. Is that possible?

when People in New York get fresh oranges from Florida why can't people in punjab get fresh oranges from nagpur?


S Bajwa ji,

All of that is not only possible, it's tragedy that such a question needs to be framed at all. Walk into any big retail shop around the world and you'd get, for example oranges from five different countries, seasonal vegetables like cauliflower all the year around etc.

Yet in India cira 2012, I can't buy fresh Nagpur oranges in Kolkata all the year round. If I'm in Mumbai I can't buy the delicious cauliflower, which is grown in the Dhapa area near Kolkata during winter. Yet these Dhapa farmers sit on the side of the Eastern Metropolitan Bypass in Kolkata with dozen of these cauliflowers in the hope that some cars will stop and buy a few. What happens to the ones that are not bought? They are kept outside and make it to the local markets. Most get spoiled and only a few are sold.

Yet I'd wager these are probably the most tasty cauliflowers produced anywhere in India. In the 21st century we have a 19th century supply chain in India as far as fresh agri produce in concerned.

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Re: FDI in Retail

Postby Dhiman » 12 Jan 2012 11:16

First of all, Walmart already operates in India in the supply chain business behind Bharti's retail outlets. The issue is not about whether Walmart can "improve" India's supply chain or not. The issue is weather Walmart can open giant retail outlets across India with 100% ownership.

amit wrote:What India needs is a string of cold storages and fleets of refrigerated trucks to transport non-grain agricultural produce from one part of the country to another.


You may need that, but India doesn't. What India needs is 24x7 running water and electricity to all the farmers in India. Do that and I assure you, you would fundamentally revolutionize agriculture in India.

Is Walmart going to import electricity and water from US for running their cold storage?

Now that's a kind of investment the GoI will not do and should not do. GoI responsibility is building roads and even though a lot needs to be done, the road connectivity is immeasurably better today than it was 10 years ago.

However, to take advantage of the road network we need massive, super efficient supply chains.

People ask what can an international retail chain like Walmart or Carrefour bring to the table which a Big Bazar or Specer's can't? The answer is the supply chain which involves a lot of management skills, much more than just the technology.


Completely false. For a massive super-efficient supply chain you need massive super efficient infrastructure. Is walmart going to build "massive super-efficient" roads and railways in India?

Provided the rules are framed right (like ensuring a certain percentage of the procurement is done within India) international chains can change the retail industrial landscape in a same way the entrance of Maruti so many years ago changed our auto industry.


Walmart's wholesale outlet in Jalandhar has already cut the sales of hundreds of shopkeepers by 40%. Who is going to put food on their table while you get your food from cold storage?

Its criminal that every year we have situations where produce like tomatoes rot in one part of the country due to over production while in another part the prices go through the roof because of a lack of supply. For India's relatively small landmass this is criminal inefficiency.


Artificial scarcity is not unique to Indian market, it also exists in other places where Walmart has been operating for decades. In many cases, corporate farms in bed with large retailers will, as a matter or policy, dispose of perfectly good produce in order to keep prices and hence their profits high.

The role of the government here is to prevent artificial scarcities from taking hold.

The massive political opposition to retail is due to the fact that the persons who are really threatened by these supply chains is the middle man.


Improve Indian infrastructure and middle-men will go away. But survey after survey all across the world where large retail outlets have established themselves show that Walmart impoverishes the communities it operates in, because it replaces large number of shop-owners who have middle-class income with small numbers of low paid workers who have poor income. Thats how Walmart makes money.

On top of that Walmart also seeks the cheapest source of goods, which also displaces manufacturing often to foreign countries.

The mandi thekedar who makes 30-40 per cent margins by buying produce from farmers cheap and selling to end users with a massive mark up feels the most threatened. Big retail would go the farmers directly.

This trader class is well-organised and politically well-connected and hence all this hue and cry.


If the problem is mandis then reform the mandis instead of bringing in the world's biggest mandi thekedar to get rid of all the smaller mandi thekedar.

Organised retail is good news for farmer and consumers. It's also in a way good news for small traders as the neighbourhood kiranas will always survive.


Incorrect, Jalandhar is a good counter example. hundreds if not thousands of shopkeeper around Walmarts whole sale outlet there have seen their incomes decline by 40%. Unlike the Children of Walton family which owns walmart, children of these shop keepers do not have a trust fund. In many cases, the children themselves are working in their parents shop to make ends meet.

Somehow the fear of big retail reminds me of the fear of computers in GoI offices and banks.


Computers and infrastructure increase productivity, big retail doesn't and yes computerization after a certain point (for example computerized manufacturing) does take away jobs. Taking jobs away may not be a bad thing since that labor can be often redeployed. However, in case of retail in India the numbers are simply too big and social impact to great to gamble with just so that you can get your Nagpur orange in Calcutta.

Walmart is not going to magically remove years of mis-administration and mis-mangement that local and state government subject their populations to. On the contrary, they are probably bribing (in order to gain entry) and lobbying the very same thugs who mis-manage the government.

By the way, when liberalization first started and Pepsico entered India, same tall tales were being told as to how Pepsico would change Indian Agriculture and more than 20 years later, you are still complaining while enjoying a drink that is so very critical to providing 24x7 water supply and electricity to Indian farmers: pepsi cola.

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Re: FDI in Retail

Postby amit » 12 Jan 2012 13:15

So Dhiman babu,

Your opposition to FDI in retail seems to be more about Walmart than the idea of retail giants operating in India? Or do you think global retail starts with Walmart and ends with the company that Sam Walton built?

You seem to forget that there are other successful retail chains out there who don’t have Walmart’s “reputation”.

What India needs is 24x7 running water and electricity to all the farmers in India. Do that and I assure you, you would fundamentally revolutionize agriculture in India.

Is Walmart going to import electricity and water from US for running their cold storage?



Sorry to have to say this but this is a typical strawman argument. Providing water and electricity to each Indian is a subject in itself and I’m surprised that you bring this into a discussion on building supply chains.

Let’s say each agriculturist in India was provided with water and electricity, how do you propose to ensure that they would be able to pay for it without improving their incomes? And do you think once you do provide them with electricity and water then the cold storages and refrigerated trucks will magically appear in India?

You may need that, but India doesn’t


And says who? Dhiman Babu?
It’s not a question of what I need or not (though I’d be happy with some rational thinking and less rhetorical arguments, but choro). It’s a question of what is needed on the ground to prevent 30 per cent of Indian agricultural output being wasted every year on account of lack of adequate storage or ability to move the stuff to the markets. You talk a lot and write huge posts but I haven't seen you come up with an idea of how to cut the loss? Have you?

Completely false. For a massive super-efficient supply chain you need massive super efficient infrastructure. Is walmart going to build "massive super-efficient" roads and railways in India?


Another strawman. You confuse public infrastructure like roads and electric power plants with private infra like cold storages, depots and refrigerated trucks? Or are you from the old Stalinist school which thinks all these should be the preserve of the GoI as well?

Walmart's wholesale outlet in Jalandhar has already cut the sales of hundreds of shopkeepers by 40%. Who is going to put food on their table while you get your food from cold storage?


I think you’ll excuse me if I don’t take your word for it. Please provide the evidence that hundreds of shopkeepers have had their business curtailed by the precise 40 per cent figure you mentioned and all that is due to Walmart

While you’re at it I’d request you to glance at this blog, particularly this part:

And so this whole “They will come and wipe us out” is just a load of panic-mongering. What will likely happen to Walmart and the larger chains is exactly what happened to McDonalds. Like McDonalds, Walmart will not be a player in the lowest segment of the market where traditional local stores, the “little guys” whom everyone is crying for, will be safe.They will have a largely urban presence and minimal penetration in the backwaters and villages where the little store selling Exide Batteries, Nirodh Condoms and Five Point Someone will continue as if nothing has happened. If anything, it will be the large Indian retail chains that might feel the pinch, which is why it is they who are driving the anti-FDI movement while claiming of course to be representing the ”the poor store-owner.”


The blog writer also says something interesting:

Of course, the real thing is it is all politics


Dhiman wrote: ncorrect, Jalandhar is a good counter example. hundreds if not thousands of shopkeeper around Walmarts whole sale outlet there have seen their incomes decline by 40%. Unlike the Children of Walton family which owns walmart, children of these shop keepers do not have a trust fund. In many cases, the children themselves are working in their parents shop to make ends meet.


I’m sorry to have to say this but this is another piece of myth making. I suggest you do some reading of how “successful” Walmart has been outside of the US. You could start by reading up its experiences in Germany, UK and China.

Walmart has not been able to successfully replicate its US model outside of the US where due to the peculiarities of these countries the US model does not work. So you talk about studies showing how Walmart has destroyed the livelihoods of people outside of the US. Compared to its US operations, Walmart has not been successful outside the US and there's no reason to believe they can replicate their US model in India.

In short please back up this argument with source material, and yes please don’t cite reports about the US. India is not the US and will never be;
But survey after survey all across the world where large retail outlets have established themselves show that Walmart impoverishes the communities it operates in, because it replaces large number of shop-owners who have middle-class income with small numbers of low paid workers who have poor income. Thats how Walmart makes money.


Dhiman wrote: Walmart is not going to magically remove years of mis-administration and mis-mangement that local and state government subject their populations to. On the contrary, they are probably bribing (in order to gain entry) and lobbying the very same thugs who mis-manage the government.


Another political statement. Sure Walmart is not going to do that. But mis-admistration is one issue and FDI in retail is another. Today the middlemen, the mandi thekedars whom you champion, bribe the local state governments. How do you propose to stop that?

By the way, when liberalization first started and Pepsico entered India, same tall tales were being told as to how Pepsico would change Indian Agriculture and more than 20 years later, you are still complaining while enjoying a drink that is so very critical to providing 24x7 water supply and electricity to Indian farmers: pepsi cola.


I’ll ignore this personal jibe, because I know where it’s coming from – as a matter of fact due to health reasons I do not drink carbonated drinks.

However, you’re again kite flying. Where and who said the entrance of Pepsico would change Indian agriculture? Please, for a change, back up your outlandish statements.

Taking jobs away may not be a bad thing since that labor can be often redeployed. However, in case of retail in India the numbers are simply too big and social impact to great to gamble with just so that you can get your Nagpur orange in Calcutta.


Another cheap personal jibe which I’ll ignore. Incidentally I don’t live in Calcutta. And yes you'll rather see those Nagpur oranges rot and spoil than see a willing customer in Calcutta pay good money for it. I get it.

However, do you have any ball park figure of how many jobs we’re talking about? Do you have any estimate of how many thousands of jobs will be created or will be lost? If you don’t then you’re just p*ssing into the wind.

yes computerization after a certain point (for example computerized manufacturing) does take away jobs.



This point of yours gives a clue to where you’re coming from.

The last time I heard such rhetorical mumbo jumbo was when the left unions paralyzed the banking system when computers were being introduced.

The refrain was: “All jobs will be lost, the multinationals are duping us poor In’juns and unless we protect you, you’ll be out on the streets with your family” etc, etc.

Action replay.

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Re: FDI in Retail

Postby amit » 12 Jan 2012 13:32

Folks who are interested, can have a look at this

Some random excerpts:

With nearly 12 percent of the world’s arable land, India is the world’s third-largest producer of food grains,
the second-largest producer of fruits and vegetables and the largest producer of milk; it also has the
largest number of livestock. Add to that a range of agro climatic regions and agri-produce, extremely
industrious farmers, a country that is fundamentally strong in science and technology, a government
committed to Indian agriculture and an economy that is on the verge of double-digit growth, and you
should have the makings of a bumper harvest.


. Worse, India is amongst the world’s largest wasters of
food and faces a potential challenge to provide food security to its growing population in light of
increasing global food prices and the declining rate of response of crops to added fertilizers.


Given a production (in 2010) of around 80 million tonnes but the combined storage space of the Food
Corporation of India, State Warehousing Corporations and other agencies of just 60 million tonnes, some
20 million tonnes of food is left out for the elements to ravage.
The estimated loss was around INR 270
billion rupees (US $6 billion). Between 1.2 million metric tonnes of rice and wheat was wasted in Punjab
alone, forcing the Supreme Court to order the Centre to distribute free food grains, especially to those in
the drought and flood-hit areas. The highest court also directed the Centre to establish a large state run
Food Corporation of India (FCI) warehouse in every state and small warehouses in all districts. In
addition, the recent introduction of a negotiable warehouse receipt (WR) system and effective
enforcement by a Warehousing Development and Regulatory Authority (WDRA) is likely to add new
storage capacity through private-sector participation.


The anti-retail and
land acquisition lobby has, however, strongly opposed the Act, which allows private companies to procure
produce directly from farmers. Those for the change allege that the Act forces farmers to sell perishable
items like fruits and vegetables only to a limited number of licensed traders at APMC mandis (wholesale
markets), thereby encouraging cartel activity in agricultural marketing. However, the traders’ lobby insists
that “the Act does not require any amendment," says Ashok Walunj, head of the onion-potato market at
Vashi APMC: “Trade cannot survive without middlemen. Were it not for us, the farmers would not be paid
a fair price for their goods on the spot. Exports should rather be resumed so farmers get a better deal.”
9
The APMC Act of most states does not encourage direct marketing and contract farming, and the
prohibitions under the APMC Act do not allow investment by the private sector for improving the
infrastructure. They do not facilitate procurement of agricultural produce directly from the fields. The
purchaser has to be a registered agent at the wholesale market.



A CRISIL Research study estimates allowing foreign direct investment in multi-brand retail could reduce
wastage by about US$ 12 billion (INR 630 billion) in the fruit and vegetable subsectors alone every year,
or about 30 percent of total output.


Note: I try to back up what I write with facts/corroboration.

While the government permits foreign investment in the supply chain, foreign retailers have been
unwilling to commit large sums of money, as there are still restrictions in multi-brand retail.
Bharti-Wal Mart estimates that it could take a decade to build a supply chain of international quality in
India, and indeed numerous presentations have been made to move India from an indigent-farmer model
to one that relies on cold chains.


The supply chains which some folks think will magically appear if water and electricity is provided to all farmers, in real life takes quite an effort to build. In fact in many global industries the life blood is not customers or research but supply chain. If one does not study it, it's easy to no see the importance of building supply chains.

Merely copying Western solutions will not suit the Indian need. In any event, unlike in the corporate sector – where multinationals
and their technology could gain easy entry because Indian companies were at par or nearly at par with them – agriculture is one area where global technologies will encounter resistance and, in many cases, for good reason. The need is to look at acceptable Indian or regional options and to implement them with a sense of purpose. Those who discount fears that MNC seed suppliers will control price and availability of seeds point out that prices are controlled and manipulated not by the entry of multinationals but by poor government policy, lack of marketing reforms and denying access to new players in agrimarketing.


The problems with our agricultural sector are many faceted and actually organised retail would tackle only a small portion of the larger problem of bad policy, fragmented land holdings and overuse of fertilisers.

However, it still does address a portion of the problem. The alternative is to sit on our hands and lament about how Westerns are looking for an opportunity to dupe us and cheat us. Xenophobia was never a solution to any problem.

JMT

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Re: FDI in Retail

Postby SBajwa » 12 Jan 2012 21:09

With nearly 12 percent of the world’s arable land, India is the world’s third-largest producer of food grains,
the second-largest producer of fruits and vegetables and the largest producer of milk; it also has the
largest number of livestock. Add to that a range of agro climatic regions and agri-produce, extremely
industrious farmers, a country that is fundamentally strong in science and technology, a government
committed to Indian agriculture and an economy that is on the verge of double-digit growth, and you
should have the makings of a bumper harvest.


and yet India has 30-40% of the world's poor!! Thus India's poverty blame goes to the regulations by GOI favoring the traders along with bad infrastructure and access to market. All GOI has to do is to Regulate the whole indian market so that it is easy to move (at least food products) around the country. Once farmers and consumers are earning enough money for 1-5 years any subsidies could be removed. Once poor have disposable income they will use it get better education and nourishment (both increase GDP of the nation and local society)

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Re: FDI in Retail

Postby SBajwa » 12 Jan 2012 21:12

by Dhiman
Walmart's wholesale outlet in Jalandhar has already cut the sales of hundreds of shopkeepers by 40%. Who is going to put food on their table while you get your food from cold storage?


Why can't these "Shopkeepers" educate themselves and get new skills? The world over lawyers need to learn new laws, accountants need to learn new rules, doctors need to learn new medicines and procedures, engineers need to learn latest technique and so forth. Only in India we have people who have no skills what so ever but to fleece the common person and then instead of contributing to the society (by education) they will rather flaunt their Mercedes, BMWs, etc.

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Re: FDI in Retail

Postby SBajwa » 12 Jan 2012 21:13

Bottom line for India to progress is

Get rid of the people who do not contribute towards GDP (stenographers, typist, clerks, etc) or force them to learn new skills.

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Re: FDI in Retail

Postby Supratik » 13 Jan 2012 00:17

SBajwa wrote:


and yet India has 30-40% of the world's poor!! Thus India's poverty blame goes to the regulations by GOI favoring the traders along with bad infrastructure and access to market. All GOI has to do is to Regulate the whole indian market so that it is easy to move (at least food products) around the country. Once farmers and consumers are earning enough money for 1-5 years any subsidies could be removed. Once poor have disposable income they will use it get better education and nourishment (both increase GDP of the nation and local society)



This argument is incorrect. The poor simply do not have the purchasing power to buy anything including food. How is allowing Walmart
or Tesco going to change that? You have about 30% of the population below poverty line. I have not observed significant differences in price of food products between big chains and small stores in the US. In fact Chinese run stores sell cheap. The other problem is 40 million people are engaged in retail. Let us say 10-20 million go out of business. What are you going to retrain them in where such large numbers can be accommodated. The only thing I can think of is manufacturing but the initiatives there have been poor. SEZ business are being closed down under the guise of tax evasion because the Govt. needs money to spend on FSB and NREGA. The National Manufacturing zones are yet to take off. There is 30% disguised unemployment. All the chai shops and trinket shops you see are nothing but subsistence level survival. So you will end up with 10% population shopping at Walmart and Tesco and 60% of the population living on FSB. You have to come up with new and bold ideas. The NAC is busy running schemes aimed at winning the next election and fixing the fascists.

FYI, the big chains appeared in the 1950-60s. By that time USA was already a developed country.

The only benefit I see is in supply chain/logistics management leading to less wastage.

IMO FDI in multi-brand retail should be allowed only after a lot of consideration.

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Re: FDI in Retail

Postby Supratik » 13 Jan 2012 00:42

amit wrote:So Dhiman babu,

Your opposition to FDI in retail seems to be more about Walmart than the idea of retail giants operating in India? Or do you think global retail starts with Walmart and ends with the company that Sam Walton built?

You seem to forget that there are other successful retail chains out there who don’t have Walmart’s “reputation”.

What India needs is 24x7 running water and electricity to all the farmers in India. Do that and I assure you, you would fundamentally revolutionize agriculture in India.

Is Walmart going to import electricity and water from US for running their cold storage?



Sorry to have to say this but this is a typical strawman argument. Providing water and electricity to each Indian is a subject in itself and I’m surprised that you bring this into a discussion on building supply chains.

Let’s say each agriculturist in India was provided with water and electricity, how do you propose to ensure that they would be able to pay for it without improving their incomes? And do you think once you do provide them with electricity and water then the cold storages and refrigerated trucks will magically appear in India?

You may need that, but India doesn’t


And says who? Dhiman Babu?
It’s not a question of what I need or not (though I’d be happy with some rational thinking and less rhetorical arguments, but choro). It’s a question of what is needed on the ground to prevent 30 per cent of Indian agricultural output being wasted every year on account of lack of adequate storage or ability to move the stuff to the markets. You talk a lot and write huge posts but I haven't seen you come up with an idea of how to cut the loss? Have you?

Completely false. For a massive super-efficient supply chain you need massive super efficient infrastructure. Is walmart going to build "massive super-efficient" roads and railways in India?


Another strawman. You confuse public infrastructure like roads and electric power plants with private infra like cold storages, depots and refrigerated trucks? Or are you from the old Stalinist school which thinks all these should be the preserve of the GoI as well?

Walmart's wholesale outlet in Jalandhar has already cut the sales of hundreds of shopkeepers by 40%. Who is going to put food on their table while you get your food from cold storage?


I think you’ll excuse me if I don’t take your word for it. Please provide the evidence that hundreds of shopkeepers have had their business curtailed by the precise 40 per cent figure you mentioned and all that is due to Walmart

While you’re at it I’d request you to glance at this blog, particularly this part:

And so this whole “They will come and wipe us out” is just a load of panic-mongering. What will likely happen to Walmart and the larger chains is exactly what happened to McDonalds. Like McDonalds, Walmart will not be a player in the lowest segment of the market where traditional local stores, the “little guys” whom everyone is crying for, will be safe.They will have a largely urban presence and minimal penetration in the backwaters and villages where the little store selling Exide Batteries, Nirodh Condoms and Five Point Someone will continue as if nothing has happened. If anything, it will be the large Indian retail chains that might feel the pinch, which is why it is they who are driving the anti-FDI movement while claiming of course to be representing the ”the poor store-owner.”


The blog writer also says something interesting:

Of course, the real thing is it is all politics


Dhiman wrote: ncorrect, Jalandhar is a good counter example. hundreds if not thousands of shopkeeper around Walmarts whole sale outlet there have seen their incomes decline by 40%. Unlike the Children of Walton family which owns walmart, children of these shop keepers do not have a trust fund. In many cases, the children themselves are working in their parents shop to make ends meet.


I’m sorry to have to say this but this is another piece of myth making. I suggest you do some reading of how “successful” Walmart has been outside of the US. You could start by reading up its experiences in Germany, UK and China.

Walmart has not been able to successfully replicate its US model outside of the US where due to the peculiarities of these countries the US model does not work. So you talk about studies showing how Walmart has destroyed the livelihoods of people outside of the US. Compared to its US operations, Walmart has not been successful outside the US and there's no reason to believe they can replicate their US model in India.

In short please back up this argument with source material, and yes please don’t cite reports about the US. India is not the US and will never be;
But survey after survey all across the world where large retail outlets have established themselves show that Walmart impoverishes the communities it operates in, because it replaces large number of shop-owners who have middle-class income with small numbers of low paid workers who have poor income. Thats how Walmart makes money.


Dhiman wrote: Walmart is not going to magically remove years of mis-administration and mis-mangement that local and state government subject their populations to. On the contrary, they are probably bribing (in order to gain entry) and lobbying the very same thugs who mis-manage the government.


Another political statement. Sure Walmart is not going to do that. But mis-admistration is one issue and FDI in retail is another. Today the middlemen, the mandi thekedars whom you champion, bribe the local state governments. How do you propose to stop that?

By the way, when liberalization first started and Pepsico entered India, same tall tales were being told as to how Pepsico would change Indian Agriculture and more than 20 years later, you are still complaining while enjoying a drink that is so very critical to providing 24x7 water supply and electricity to Indian farmers: pepsi cola.


I’ll ignore this personal jibe, because I know where it’s coming from – as a matter of fact due to health reasons I do not drink carbonated drinks.

However, you’re again kite flying. Where and who said the entrance of Pepsico would change Indian agriculture? Please, for a change, back up your outlandish statements.

Taking jobs away may not be a bad thing since that labor can be often redeployed. However, in case of retail in India the numbers are simply too big and social impact to great to gamble with just so that you can get your Nagpur orange in Calcutta.


Another cheap personal jibe which I’ll ignore. Incidentally I don’t live in Calcutta. And yes you'll rather see those Nagpur oranges rot and spoil than see a willing customer in Calcutta pay good money for it. I get it.

However, do you have any ball park figure of how many jobs we’re talking about? Do you have any estimate of how many thousands of jobs will be created or will be lost? If you don’t then you’re just p*ssing into the wind.

yes computerization after a certain point (for example computerized manufacturing) does take away jobs.



This point of yours gives a clue to where you’re coming from.

The last time I heard such rhetorical mumbo jumbo was when the left unions paralyzed the banking system when computers were being introduced.

The refrain was: “All jobs will be lost, the multinationals are duping us poor In’juns and unless we protect you, you’ll be out on the streets with your family” etc, etc.

Action replay.



If Walmart is not going to be successful outside America why the sudden rush to bring it in India. McDonalds and Pepsi are bad examples. McDonalds or KFC really didn't have much competition as such concepts were not prevalent in India. That is good FDI as it creates opportunities where none exists. Beverages are a bad example as most Indian businesses have exited.

Can you list the benefits of FDI in retail? The only thing I can think of are better supply chain/logistics management leading to less wastage.

Most of us are not opposed to FDI as you suggest but in this case the benefits are not clear.

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Re: FDI in Retail

Postby Dhiman » 13 Jan 2012 01:06

amit wrote:So Dhiman babu,
You seem to forget that there are other successful retail chains out there who don’t have Walmart’s “reputation”.


Read my last few posts, I have already clarified this. Retail is not a scarce commodity that needs to be imported or high tech item that is not available in the country. Its already there and lot's of it, so FDI in retail is frivolous and unnecessary.

amit wrote:
Dhiman wrote: What India needs is 24x7 running water and electricity to all the farmers in India. Do that and I assure you, you would fundamentally revolutionize agriculture in India.

Is Walmart going to import electricity and water from US for running their cold storage?



Sorry to have to say this but this is a typical strawman argument. Providing water and electricity to each Indian is a subject in itself and I’m surprised that you bring this into a discussion on building supply chains.
[/quote]

You said "India needs cold storage and fleets of refrigerated trucks." What I am telling you is that cold storage and refrigerated trucks is least of India's problem right now. What India needs is electricity and water the most. And once you are done with electricity and water, worry about lack of regular storage first before moving on to cold storage. The real strawman argument is that "India needs cold storage," but I don't blame you for it, since you are simply repeating the PR propaganda that Walmart's PR department is putting in the media.Cold storage is least of India's problems.

amit wrote:Another strawman. You confuse public infrastructure like roads and electric power plants with private infra like cold storages, depots and refrigerated trucks? Or are you from the old Stalinist school which thinks all these should be the preserve of the GoI as well?


LOL, :rotfl: You call me "stalinist" yet you distinguish between "public vs private infrastructure". In reality Sir, there is no such thing is a public or private infrastructure as there is no reason why roads, electric power plant, water distribution systems, ports, railways, etc have to be public.

amit wrote: Walmart's wholesale outlet in Jalandhar has already cut the sales of hundreds of shopkeepers by 40%. Who is going to put food on their table while you get your food from cold storage?

I think you’ll excuse me if I don’t take your word for it. Please provide the evidence that hundreds of shopkeepers have had their business curtailed by the precise 40 per cent figure you mentioned and all that is due to Walmart


I will try to dig up the reference, (in fact I will try to prepare an entire article with multiple references) but please your "blog" is hardly a reliable source of information mostly an opinion piece.

amit wrote:Walmart has not been able to successfully replicate its US model outside of the US where due to the peculiarities of these countries the US model does not work. So you talk about studies showing how Walmart has destroyed the livelihoods of people outside of the US. Compared to its US operations, Walmart has not been successful outside the US and there's no reason to believe they can replicate their US model in India.


This is not about Charity, its about what selfish benefits FDI in retail will provide. Walmart is not coming to India for Charity or to improve Indian supply chain or reduce farm wastage because that is not going to happen without improving India's general infrastructure. There are plenty of multi-brand retail outlets in India, so Walmart isn't exactly introducing a difficult-to-replicate business model. multi-brand retail is not a scarce commodity or a high tech item that needs FDI, so there is no benefit of allowing FDI in retail.

If your only argument for multi-brand retail is "cold storage", it's a rather flimsy argument.

amit wrote:
Dhiman wrote: Walmart is not going to magically remove years of mis-administration and mis-mangement that local and state government subject their populations to. On the contrary, they are probably bribing (in order to gain entry) and lobbying the very same thugs who mis-manage the government.


Another political statement. Sure Walmart is not going to do that. But mis-admistration is one issue and FDI in retail is another. Today the middlemen, the mandi thekedars whom you champion, bribe the local state governments. How do you propose to stop that?


The point Sir is that FDI is not an excuse for domestic reforms as such inefficiencies exist everywhere in India not just mandis and "cold storage".

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Re: FDI in Retail

Postby gakakkad » 13 Jan 2012 08:11

>>You said "India needs cold storage and fleets of refrigerated trucks." What I am telling you is that cold storage and refrigerated trucks is least of India's problem right now. What India needs is electricity and water the most. And once you are done with electricity and water, worry about lack of regular storage first before moving on to cold storage. The real strawman argument is that "India needs cold storage," but I don't blame you for it, since you are simply repeating the PR propaganda that Walmart's PR department is putting in the media.Cold storage is least of India's problems.


India is already adding 20k-20k MW power every year to its grid. The rate needs to double .Now power generation and FDI in retail are 2 different things. Not allowing FDI in retail will not solve the power problem . Nor will allowing it . These 2 issue's have no link with each other .


>>Read my last few posts, I have already clarified this. Retail is not a scarce commodity that needs to be imported or high tech item that is not available in the country. Its already there and lot's of it, so FDI in retail is frivolous and unnecessary.

If someone wants to come and invest money in India , my father what goes ? Let them come and open more shops . Consumer will decide who stays and who goes. Both can stay even . I estimate 20-30% CAGR in retail .

>>This is not about Charity, its about what selfish benefits FDI in retail will provide. Walmart is not coming to India for Charity or to improve Indian supply chain or reduce farm wastage because that is not going to happen without improving India's general infrastructure. There are plenty of multi-brand retail outlets in India, so Walmart isn't exactly introducing a difficult-to-replicate business model. multi-brand retail is not a scarce commodity or a high tech item that needs FDI, so there is no benefit of allowing FDI in retail.

If your only argument for multi-brand retail is "cold storage", it's a rather flimsy argument.


Of course it is about profits and selfishness. I don't plan to practice medicine for a charity . I ll make a hefty 30-40% margin on an angioplasty . Wal mart has lower margins . :evil: Don't you people get it ? It is business , not charity . We need to allow more business , and allow more profit and allow more selfishness to flourish . That my dear friend is the basic tenet of capitalism . No one ever said that FDI in retail is about charity .

Regarding cold storage , we need a better infrastructure in these . No one doubts that . I would rather have the government privatize food corporation of India .

>>The point Sir is that FDI is not an excuse for domestic reforms as such inefficiencies exist everywhere in India not just mandis and "cold storage".


FDI is not a substitute for domestic reforms. But both can co-exists. Domestic reforms are very essential . No one is saying that FDI comes all of India's problem will be solved , etc . That is nonsense. FDI will simply bring in 5-20 billion dollars of investment in India. Perhaps a bit more. It ll have a limited positive impact . But no negative one . It ll not solve the food wastage problems till the government dissolves the food corp of India and stops maintaining food warehouses. Agricultural sector reforms are very important .

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Re: FDI in Retail

Postby amit » 13 Jan 2012 09:05

Supratik wrote:Can you list the benefits of FDI in retail? The only thing I can think of are better supply chain/logistics management leading to less wastage.


And you think that's just a trifle benefit, not worth the bother? Do you realise that 30 per cent of non-grain agricultural produce perishes every year in India because there's no supply chain distribution system which can ensure that these produce reach markets both in India and abroad?

Why don't you do a back of the envelope calculation of what, say a 15 per cent drop in this wastage, would do to incomes of small farmers whose produce are the ones that rot because they do not have the capacity to take it to the nearest Mandi? Do note that even in developing economies such as Malaysia, for example, wastage is in the low single digits.

An organised retail supply chain which buys directly from farmers, gives the later more money and the shoppers get fresher products at cheaper rates. In a small scale ITC's e-Choupal has proved this. However, what India needs is a system which is a 100 times bigger and pan Indian.

I don't know if you follow it, but a part of the reason we've had persistent food inflation is because of distribution bottlenecks. The inflation would have been at least a couple of percentage points lower if there had been well oiled supply chains which could move agri produce from one end of India to another in a couple of days. Such networks will never be built by the GoI because these are highly specialised operations.

Big retail - its about time we got over our Walmart fixation, there are other massive players out there - who source globally are the experts in such supply chains. I really don't care if Walmart opens or does not open retail outlets as long as the supply chain comes up.

And the interesting thing is in China Walmart does around US$7.5 billion in business from retail, just a drop in the ocean as far as its turnover goes. Yet Walmart sources around 70 per cent of what it sells in the US from China including agri produce. You know why that's possible? It's because they have an efficient supply chain in China.

I want a similar supply chain coming up in India. That would do wonders to our exports.

Regarding retail outlets, I'm sure that just like in China, Germany, the UK and other places, Walmart will not be able to replicate its US model and it will be one player among many. And I'd bet my last rupee that local retail brands will more than hold their own against foreign competition in India.

The mindless fear of foreign investment reminds be of the initial reaction in 1992 when the economy was opened up. "The foreigners will kill local businesses and make India impoverished by looting us." It's amazing how even after two decades of reforms this ghost refuses to go away.

I sometimes wonder why we have such a low level of self confidence in our ability to play against the best? Someone wants to invest in India and we get sleepless nights thinking how they will jack us. Seesh!

In China if somebody wants to invest they spend sleepless nights thinking how they can take advantage of that. That I'm afraid is the difference between us and the Chinese.

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Re: FDI in Retail

Postby amit » 13 Jan 2012 09:13

gakakkad wrote:FDI is not a substitute for domestic reforms. But both can co-exists. Domestic reforms are very essential . No one is saying that FDI comes all of India's problem will be solved , etc . That is nonsense. FDI will simply bring in 5-20 billion dollars of investment in India. Perhaps a bit more. It ll have a limited positive impact . But no negative one . It ll not solve the food wastage problems till the government dissolves the food corp of India and stops maintaining food warehouses. Agricultural sector reforms are very important .


Spot on.

However, when someone talks about domestic reform, electricity and water for all etc in the same sentence as FDI in retail, then I know its nothing but rhetorical mumbo jumbo.

Not worth getting worked up about it, or bothering to reply, my friend.

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Re: FDI in Retail

Postby Dhiman » 13 Jan 2012 11:00

gakakkad wrote:Not allowing FDI in retail will not solve the power problem . Nor will allowing it . These 2 issue's have no link with each other .


Exactly my point, the only problem is that there are people who think that FDI in multi-brand retail will somehow make the supply chains "super efficient" when the rest of the infrastructure is no where near being super-efficient. I am simply trying to counter this point.

There is no relation between supply chain and FDI in retail. The relation is between supply chain and the infrastructure that the supply chain operates on.

If someone wants to come and invest money in India , my father what goes ? Let them come and open more shops .

Consumer will decide who stays and who goes. Both can stay even . I estimate 20-30% CAGR in retail .


Spoken like a true laissez-faire capitalist and may god bless you :D and nothing wrong with it, besides the fact that such concepts only exist in books, not in real world anywhere in any country.

Those who are arguing for 100% FDI in retail need to show what benefit it will bring to the country and certainly "super efficient" supply chain is not one of those benefits. Otherwise, all sorts of retail already exists in India and I am more than happy to let these Indian retail outlet benefit from 20-30% CAGR rather than give a piece of the pie to Walmart without Walmart providing any real, clear, and unambiguous benefits.

Again, this is not about Charity, its about what benefits 100% FDI will provide - benefits that would not otherwise accrue. This is about shelfishness, so I as a mango man is looking for some real good shelfish reasons to allow for 100% FDI in retail and I see none.

Also, most Indians are not willing to gamble with livelihood of even 10% of millions of shopkeepers, and that is the exact reason why 100% FDI in retail did not fly and won't fly anytime soon.

Of course it is about profits and selfishness. I don't plan to practice medicine for a charity . I ll make a hefty 30-40% margin on an angioplasty . Wal mart has lower margins . :evil:


Good point Sir and I am sure your medical degree is worth its weight in gold. But in all honesty that is the exact reason why one needs to regulate the medical (and other) professions rather than letting any quack call himself a doctor and practice his/her quackery without providing any real benefits to the larger public. The same reason why retail needs to be regulated as well.

Don't you people get it ? It is business , not charity . We need to allow more business , and allow more profit and allow more selfishness to flourish

That my dear friend is the basic tenet of capitalism . No one ever said that FDI in retail is about charity .


Once again Sir, your laissez-faire capitalism impresses me and Amen :D

Regarding cold storage , we need a better infrastructure in these . No one doubts that . I would rather have the government privatize food corporation of India .


Agreed.

FDI is not a substitute for domestic reforms. But both can co-exists.


I can understand that, but not unless FDI in retail is bringing in some real benefits. Otherwise, I as a selfish mango person, have absolutely no reason to give part of the Indian retail market to Walmart in charity because rest assured walmart is not lobbying the government to do charity work in India.

Domestic reforms are very essential . No one is saying that FDI comes all of India's problem will be solved , etc . That is nonsense.


Thank you for saying that.

FDI will simply bring in 5-20 billion dollars of investment in India.


Saying that "We need 100% FDI in retail because we need $5 to $20 billion in hard currency" certainly makes more sense than regurgitated PR propaganda such as "100% FDI in retail will make supply chains super efficient."

Perhaps a bit more. It ll have a limited positive impact . But no negative one .


So no clear benefits. I will take up the "negative impact" part in a later post.

It ll not solve the food wastage problems till the government dissolves the food corp of India and stops maintaining food warehouses. Agricultural sector reforms are very important .


Good points.

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Re: FDI in Retail

Postby amit » 13 Jan 2012 15:10

Well I suppose this article written by an associate professor of the Institute of Financial Management and Research (IFMR) is hogwash because he thinks FDI in retail is about supply chains. What rubbish right?

FDI in retail will bring down inflation by investing in supply chain logistics, that is, by investing in transport and refrigerated storage necessary for perishable items. Typically, if a farmer were to sell his produce, he needs to bring it to the local market where he usually auctions it to the retailer, who, in turn, will sell to the final consumers.

This process of auctioning in the mandi (central market) is facilitated by the middleman, who charges a commission from the farmers. Add to this the cost of bringing the agricultural produce to the local market; the price difference between what the farmers get and what the consumers pay is what society loses out due to inefficiency.

By investing in supply chain logistics, the players in multi-brand retail will reduce the cost, and bring down inflation. They will procure the produce directly from the farmers, keep it in their storage, and transport it directly to their retail outlet. It is worthy to note that there is a huge investment involved to get the supply chain logistics in place — something that FDI in retail promises.

Those who have been arguing that the local kirana and the marginal farmers may be hurt — the former losing out on business, and the latter not getting the right price – are not right. Currently, the local kirana, and retail outlets such as Reliance Fresh, Tata-Tesco, and Spencer, to name a few, are co-existing comfortably with each other.{Except for in Jalandhar I guess :roll: }

Marginal farmers also stand to gain. Recent evidence suggests that marginal farmers who have entered into contracts with Pepsi India have on average realised double the price in comparison with the local mandi and the local mahajan (in absence of the local mandi). This is an eye-opener for those suggesting that multinationals will squeeze the farmers by not offering them the right price. {Oops I forgot Pepsico hoodwinked all of us, while we were busy sipping mulitnational cola}

Experience from around the globe suggests that the local kirana needs to worry from the spread of e-commerce, and not the presence of corporates in the retail sector. India badly needs corporatisation of the agriculture sector to even out distribution of income. The ITC and Pepsi examples have shown that, in their best interest, corporates directly get in touch with the farmers, and give them the necessary information on how to increase crop output and productivity.


The author also says something else:

It is to be noted that the agriculture sector receives minuscule investment, while supporting the livelihoods of around 55 per cent of the population.


Now the question to ask is if an international brand retail were to invest say U$100 million in India, what percentage would go to setting up shops and what percentage would go to building the supply chain (which would in effect be agriculture related investment). A little bit of digging via Google chaccha would provide the answer. I'm sure the answer would supply a lot of folks.

And wonder of wonders, that bastion of capitalist robber barons, the World Bank in this paper has aired these "lies" about FDI in retail:

There is a general misconception that market-seeking FDI in domestic sectors such as retail yields little development impact. The opposite is true. FDI in retail has been a key driver of productivity growth in Brazil, Poland, and Thailand, resulting in lower prices and higher consumption. Large-scale foreign retailers are also forcing wholesalers and food processors to improve. And they are now becoming important sources of exports: Tesco in Thailand and Wal-Mart in Brazil are increasingly turning to local products to feed their global supply chains.


The portion in blue above should be read with the Crisil report which says 30 per cent of farm output in India is wasted.

Meanwhile, I'm still waiting to read those tons of reports about how Walmart has impoverished communities all around the world...

Oh yes, before I forget, this "stupid" World Bank report also says this:

The misconceptions about FDI are made worse by political economy factors: while attracting efficiency-seeking FDI does not
affect incumbents, attracting market-seeking FDI usually does.


The middle men in the food business, the Mandi walas and wholesale traders are a very powerful political group with lots of money. They know the right strings to pull and thus you have so much political opposition to a potential game changer in India. With so much going for them, a lot of folks have jumped on the bandwagon, many without realising the issues involved.

Nevermind that a more efficient distribution systems would mean more money in the hand of farmers and better and cheaper foodstuff for consumers.

Oh well...
Last edited by amit on 13 Jan 2012 15:31, edited 1 time in total.

amit
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Re: FDI in Retail

Postby amit » 13 Jan 2012 15:27

The ICRIER study on FDI in retail in 2008 still remains the most exhaustive one for India.

Any one interested can have a look at it here

The interesting point in the report is this:

Profit realisation for farmers selling directly to organised retailers is about 60 percent higher than that received from selling in the mandi. The difference is even larger when the amount charged by the commission agent (usually 10 percent of sale price) in the mandi is taken into account.


So 60-70 per cent more income to marginal farmers, means less money for the fatcat mandi owners who rip off both the end consumer and the primary producer. Is it any wonder that they've orchestrated such fierce political opposition?

Folks should read a bit, its an interesting subject.

The people who feel threatened are not the local kiranas. Its these corepati mandi walas.

This is what the ICRIER study has to say:

• Unorganised retailers in the vicinity of organised retailers experienced a decline in their volume of business and profit in the initial years after the entry of large organised retailers
The adverse impact on sales and profit weakens over time
There was no evidence of a decline in overall employment in the unorganised sector as a result of the entry of organised retailers

The rate of closure of small retail stores on account of competition from organised retail was found to be 1.7 percent per annum. Further, there was optimism in the small retail community: There is competitive response from traditional retailers through improved business practices and technology upgradation. A majority of unorganised retailers is keen to stay in the business and compete, while also wanting the next generation to continue likewise.

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Re: FDI in Retail

Postby Supratik » 13 Jan 2012 16:15

amit wrote:
Supratik wrote:Can you list the benefits of FDI in retail? The only thing I can think of are better supply chain/logistics management leading to less wastage.


And you think that's just a trifle benefit, not worth the bother? Do you realise that 30 per cent of non-grain agricultural produce perishes every year in India because there's no supply chain distribution system which can ensure that these produce reach markets both in India and abroad?

Why don't you do a back of the envelope calculation of what, say a 15 per cent drop in this wastage, would do to incomes of small farmers whose produce are the ones that rot because they do not have the capacity to take it to the nearest Mandi? Do note that even in developing economies such as Malaysia, for example, wastage is in the low single digits.

An organised retail supply chain which buys directly from farmers, gives the later more money and the shoppers get fresher products at cheaper rates. In a small scale ITC's e-Choupal has proved this. However, what India needs is a system which is a 100 times bigger and pan Indian.

I don't know if you follow it, but a part of the reason we've had persistent food inflation is because of distribution bottlenecks. The inflation would have been at least a couple of percentage points lower if there had been well oiled supply chains which could move agri produce from one end of India to another in a couple of days. Such networks will never be built by the GoI because these are highly specialised operations.

Big retail - its about time we got over our Walmart fixation, there are other massive players out there - who source globally are the experts in such supply chains. I really don't care if Walmart opens or does not open retail outlets as long as the supply chain comes up.

And the interesting thing is in China Walmart does around US$7.5 billion in business from retail, just a drop in the ocean as far as its turnover goes. Yet Walmart sources around 70 per cent of what it sells in the US from China including agri produce. You know why that's possible? It's because they have an efficient supply chain in China.

I want a similar supply chain coming up in India. That would do wonders to our exports.

Regarding retail outlets, I'm sure that just like in China, Germany, the UK and other places, Walmart will not be able to replicate its US model and it will be one player among many. And I'd bet my last rupee that local retail brands will more than hold their own against foreign competition in India.

The mindless fear of foreign investment reminds be of the initial reaction in 1992 when the economy was opened up. "The foreigners will kill local businesses and make India impoverished by looting us." It's amazing how even after two decades of reforms this ghost refuses to go away.

I sometimes wonder why we have such a low level of self confidence in our ability to play against the best? Someone wants to invest in India and we get sleepless nights thinking how they will jack us. Seesh!

In China if somebody wants to invest they spend sleepless nights thinking how they can take advantage of that. That I'm afraid is the difference between us and the Chinese.



First some of the fallacies need to be pointed out. I have not observed significant differences in prices between small shops and chains in the USA. I have seen small shops sell food cheaper. That Walmart-type stores destroy local business and manufacturing is already well documented - I recall a PBS documentary on the same. You are assuming "mindless opposition to foreign investment" while I have pointed out that there is no blanket opposition to FDI.

The point about better supply chain/logistics management has already been conceded. That is the only benefit I see.The comparison with China is not correct. China "first" became the primary supplier and then opened to big retail.

There is no "low level of confidence in our ability". However, being careful is prudent. Many like you were bullish about the Soviet socialist model between the 1947-1991. Many hagiographies had been written on the JLN and IG models. We can see the end result.

The benefit to farmers will be marginal. Ultimately subsistence level farming is not viable. Say you earn Rs 50,000 every year. If there is a 30% increase due to direct selling to big retail your income goes upto Rs 65,000. You will still remain at subsistence level. Ultimately farming is not a very profitable profession unless you are a really big farmer. Even in advanced countries farming is heavily subsidized.

You are talking about middlemen but big retail is also a middleman. Only thing is you will replace say 10 million retailers with 10 companies. The underlying profiteering is the same. The question is what are the middlemen going to do when they go out of business. Open chai stalls. Or are they plain evil who supposedly vote for fascists that need to be ignored.

Coming back to the issue. From what I gathered big retail is not happy with opening of the wholesale market. The various Bharti-Walmart, Metro Cash and Carry stores have invested only a few thousand crores so far. Now if the intention was to improve the supply chain/logistics then this would have been sufficient because you buy from the farmer and sell to retailers. However, they are not satisfied and hence haven't invested much. They want to setup the entire chain from farm to fork. So there is pressure to open up further.

My last comment is that any progress in this sector should happen slowly so that people are able to adapt to the changes.
FDI in retail should be limited to the Metros first to see how it turns out.

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Re: FDI in Retail

Postby amit » 13 Jan 2012 16:49

Supratik wrote:First some of the fallacies need to be pointed out. I have not observed significant differences in prices between small shops and chains in the USA. I have seen small shops sell food cheaper. That Walmart-type stores destroy local business and manufacturing is already well documented - I recall a PBS documentary on the same. You are assuming "mindless opposition to foreign investment" while I have pointed out that there is no blanket opposition to FDI.


Please don't fall into the trap of superimposing your US experience to the Indian context. I think I've provided enough evidence above to show that Walmart has not bee able to/will not be able to replicate its US model around the world. In most others countries in the world where Walmart is/has operated it's not the No1 and is one among several. Please do some reading, Walmart's global business has been less than spectacular. There is no reason to believe that in India it would be any different.

China "first" became the primary supplier and then opened to big retail.


As far as Walmart and China goes, are you sure of this? Again there's plenty of literature on the Internet on this.

The benefit to farmers will be marginal. Ultimately subsistence level farming is not viable. Say you earn Rs 50,000 every year. If there is a 30% increase due to direct selling to big retail your income goes upto Rs 65,000. You will still remain at subsistence level. Ultimately farming is not a very profitable profession unless you are a really big farmer. Even in advanced countries farming is heavily subsidized.


Please glance through my two posts above yours. According to the ICRIER study your conclusion is false. There is 60-70 per cent hike in incomes. And you confuse two issues. One is better remuneration for whatever little a subsistence level farmer produces and the fact that due to small land holdings a farmer is a marginal subsistence level farmer. Getting him out of subsistence level farming is a different issue. The issue here is he gets 60-70 per cent better price for whatever little he produces. Is that a bad thing?

The underlying profiteering is the same.


Again empirical data proves you're wrong. Please have a look at the World Bank report I linked earlier. Unless you are one of those who think the World Bank is a capitalist conspiracy, you'll find your conclusion are not matched by empirical evidence.

The question is what are the middlemen going to do when they go out of business. Open chai stalls. Or are they plain evil who supposedly vote for fascists that need to be ignored.


I don't know if you've every visited a sabzi mandi. If you have then I think your concern for these middlemen would be less. Even a small time mandi thekedar is a rupee millionaire many times over and most of their money is made by short changing those subsistence farmers you are talking about. I wouldn't lose too much sleep about their welfare. It would, however, give me immense satisfaction if farmers get a better price for their produce while at the same time the end consumer pays either lesser or the same.

Coming back to the issue. From what I gathered big retail is not happy with opening of the wholesale market. The various Bharti-Walmart, Metro Cash and Carry stores have invested only a few thousand crores so far. Now if the intention was to improve the supply chain/logistics then this would have been sufficient because you buy from the farmer and sell to retailers. However, they are not satisfied and hence haven't invested much. They want to setup the entire chain from farm to fork. So there is pressure to open up further.


I'm sorry to say this, and please don't take it personally, but your comment (bolded) shows you have no idea of the logistics of setting up a supply chain. And if the farmer gets a better price and end users get better quality, what's the problem with a farm to fork supply chain.

Also I see that there's are various arguments against organised retail, some serious others laughable but nobody is ready to tackle the 800lb gorrilla in the room. How do you ensure that 30 per cent of Indian farm output is not wasted every year?

My last comment is that any progress in this sector should happen slowly so that people are able to adapt to the changes.
FDI in retail should be limited to the Metros first to see how it turns out.


How slow is slow? Talk about FDI in retail has been around since 2007-08 and we are still nowhere near its full potential. To think foreign companies will have infinite patience and wait for all manner of political opportunism to run its course is a fallcy. One of the best run retail giant French company Carrefore has already cancelled their India plans. Regarding Metros vis a vis rural areas, you can rest assured that organised FDI will always remain a urban phenomenon in India for the next 20 years at least - or still such time rural incomes match present day urban incomes. Every single study points in that direction.

It always helps to read about a subject before forming definitive opinions. JMT.

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Re: FDI in Retail

Postby harbans » 13 Jan 2012 16:58

Amit ji, nice having you back in full flow. The infrastructural investments required in India for cold storage, processing, warehousing will amount to 100 billion dollars or more over a few years. That money would go to transportation companies, land acquisitions, massive refrigeration units all which will create employment for millions. China opened retail up in the 90's and it's manufacturing got a major push due to that. As someone pointed out the cost of a Tropicana in the US and Gurgaon is same. That should not be.

Also there is the need to bring in more Industries into the organized sector. Tax revenue streams for the Govt will rise up on that account. This has already happened due to primary early 90 reforms. A major thrust further is required to remove visible inefficiencies in the supply chain and cold storage systems. A 30-40% wastage of essential food stuff is a colossal waste of tens of Billions of Dollars every year.

Delays in implementing these essential reforms are costing the nation massively more than any corruption scandal today. That's a cost people are not working out as yet. The cost of delay of policy reforms. I mentioned before that if India started it's reform process 6 years earlier we would be a 5 T USD economy as of today. We are still at the 2T mark..that means we are losing 3T Dollars worth of GDP yearly in a notional sense due to delay in implementing needed reform. That additional money would have gone to health, education and defense..but we don't have it as yet.

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Re: FDI in Retail

Postby Supratik » 13 Jan 2012 17:23

amit wrote:
Supratik wrote:First some of the fallacies need to be pointed out. I have not observed significant differences in prices between small shops and chains in the USA. I have seen small shops sell food cheaper. That Walmart-type stores destroy local business and manufacturing is already well documented - I recall a PBS documentary on the same. You are assuming "mindless opposition to foreign investment" while I have pointed out that there is no blanket opposition to FDI.


Please don't fall into the trap of superimposing your US experience to the Indian context. I think I've provided enough evidence above to show that Walmart has not bee able to/will not be able to replicate its US model around the world. In most others countries in the world where Walmart is/has operated it's not the No1 and is one among several. Please do some reading, Walmart's global business has been less than spectacular. There is no reason to believe that in India it would be any different.

China "first" became the primary supplier and then opened to big retail.


As far as Walmart and China goes, are you sure of this? Again there's plenty of literature on the Internet on this.

The benefit to farmers will be marginal. Ultimately subsistence level farming is not viable. Say you earn Rs 50,000 every year. If there is a 30% increase due to direct selling to big retail your income goes upto Rs 65,000. You will still remain at subsistence level. Ultimately farming is not a very profitable profession unless you are a really big farmer. Even in advanced countries farming is heavily subsidized.


Please glance through my two posts above yours. According to the ICRIER study your conclusion is false. There is 60-70 per cent hike in incomes. And you confuse two issues. One is better remuneration for whatever little a subsistence level farmer produces and the fact that due to small land holdings a farmer is a marginal subsistence level farmer. Getting him out of subsistence level farming is a different issue. The issue here is he gets 60-70 per cent better price for whatever little he produces. Is that a bad thing?

The underlying profiteering is the same.


Again empirical data proves you're wrong. Please have a look at the World Bank report I linked earlier. Unless you are one of those who think the World Bank is a capitalist conspiracy, you'll find your conclusion are not matched by empirical evidence.

The question is what are the middlemen going to do when they go out of business. Open chai stalls. Or are they plain evil who supposedly vote for fascists that need to be ignored.


I don't know if you've every visited a sabzi mandi. If you have then I think your concern for these middlemen would be less. Even a small time mandi thekedar is a rupee millionaire many times over and most of their money is made by short changing those subsistence farmers you are talking about. I wouldn't lose too much sleep about their welfare. It would, however, give me immense satisfaction if farmers get a better price for their produce while at the same time the end consumer pays either lesser or the same.

Coming back to the issue. From what I gathered big retail is not happy with opening of the wholesale market. The various Bharti-Walmart, Metro Cash and Carry stores have invested only a few thousand crores so far. Now if the intention was to improve the supply chain/logistics then this would have been sufficient because you buy from the farmer and sell to retailers. However, they are not satisfied and hence haven't invested much. They want to setup the entire chain from farm to fork. So there is pressure to open up further.


I'm sorry to say this, and please don't take it personally, but your comment (bolded) shows you have no idea of the logistics of setting up a supply chain. And if the farmer gets a better price and end users get better quality, what's the problem with a farm to fork supply chain.

Also I see that there's are various arguments against organised retail, some serious others laughable but nobody is ready to tackle the 800lb gorrilla in the room. How do you ensure that 30 per cent of Indian farm output is not wasted every year?

My last comment is that any progress in this sector should happen slowly so that people are able to adapt to the changes.
FDI in retail should be limited to the Metros first to see how it turns out.


How slow is slow? Talk about FDI in retail has been around since 2007-08 and we are still nowhere near its full potential. To think foreign companies will have infinite patience and wait for all manner of political opportunism to run its course is a fallcy. One of the best run retail giant French company Carrefore has already cancelled their India plans. Regarding Metros vis a vis rural areas, you can rest assured that organised FDI will always remain a urban phenomenon in India for the next 20 years at least - or still such time rural incomes match present day urban incomes. Every single study points in that direction.

It always helps to read about a subject before forming definitive opinions. JMT.



You are assuming I am not well read. I have lived and worked in both USA and India for long periods of time. Yes, it is true that China first became the primary supplier and then opened retail. China also opened retail very conservatively. This for a country that has successfully diverted a significant proportion of the population towards manufacturing. I don't want to get into a wrangling match with you.

Anyway, the pros of FDI in retail
1) Better logistics/supply chain management leading to less food wastage.
2) Some benefit to farmers although there are reports available from other countries that farm prices have either remained
constant or decreased. May benefit large farmers.
3) Benefit to the upper middle class/middle class as they can now shop in sanitized American-style environments. However, it is not clear if there will be any great benefit to consumers as far as prices are concerned.

the cons are
1) livelihood of millions who depend on this trade in a country with chronic poverty and underemployment. Lying to the public by you know who that it will create millions of jobs when actually due to better efficiency it will reduce the number of people employed in this trade.

So to create a balance FDI in retail should be limited to the Metros for the first 5-10 years. As enough opportunities are being created in other sectors of the economy so that more number of people can be absorbed then only it can be expanded.

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Re: FDI in Retail

Postby amit » 13 Jan 2012 17:28

harbans wrote:Amit ji, nice having you back in full flow. The infrastructural investments required in India for cold storage, processing, warehousing will amount to 100 billion dollars or more over a few years. That money would go to transportation companies, land acquisitions, massive refrigeration units all which will create employment for millions. China opened retail up in the 90's and it's manufacturing got a major push due to that. As someone pointed out the cost of a Tropicana in the US and Gurgaon is same. That should not be.


Harbans ji,

Thank you for you kind words. Was away due to various reason the main was because I was busy with some work. :D

As usual, in one paragraph you've summarised the crux of the issue. What many folks here don't realise is that the life blood of a Walmart or Tesco is not the shop fronts, its the back end. For every one shop attendant, there'd be at least four in the supply chain. And if, say, a retail major invests US$100 million, a major portion would go into building the supply chain and that takes time, I've cited a reference in one of my earlier posts in which Bharti-Walmart said it takes around 10 years. If you look at the China example as a case study that's about the time it takes.

What is also not realised is that once a Walmart of Tesco builds a supply chain, its not going to be just India specific, it will be linked to their global supply chain. This gives an unprecedented opportunity for export of agri produce (remember the 30 per cent that's wasted every year). Till now India's agri export, save for rice, has been ad hoc efforts at best. This ensures a smooth flow because a purchasing officer in Walmart is interested in a good price and quality and not the origin of a tomato or cauliflower and I think our agri produce is of a higher quality than Chinese maal.

This linkage to the global supply chain is one big advantage which a global chain has over India-based operators. The other is much better expertise. That's precisely why Bharti teamed up with Walmart and the Tatas with Tesco. It's not about the money, its about the knowhow and reach. If was just about the money, Bharti, Tata, Reliance have enough money to open as many stores as they want.

The problem is when one thinks about FDI in retail one just imagine huge retail stores. They fail to understand that the really important thing is what behind the stores and that is more vital than the actual stores themselves. JMT


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