Folks take my two post for what they are worth. I just like to let you know irrespective of your opinions/comments I'm not going to respond.amit wrote: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?
The author also says something else: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}
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.
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.It is to be noted that the agriculture sector receives minuscule investment, while supporting the livelihoods of around 55 per cent of the population.
And wonder of wonders, that bastion of capitalist robber barons, the World Bank in this paper has aired these "lies" about FDI in retail:
The portion in blue above should be read with the Crisil report which says 30 per cent of farm output in India is wasted.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.
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 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.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.
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...
TIA