Indian Economy - News & Discussion 27 May 2012

[Rishirishi]

Wallmart is going to have a hard time.

1 A supply chain does not exist to support such opperations. Hard to transport goods between states. No organised largescale vegitable and fruit system.
2 Wallmart type stores requires a lot of cheap retail space.
3 There are several Indian players who are there to compete. Big bazar being one of them.
4 India is full of "china Bazar" type items. They avoid taxes by underinvoicing at customs. It is going to be hard to comete against them.

[nachiket]

Prime Minister Manmohan Singh's team behind the recent reforms blitzkrieg

What blizkrieg? All they have done so far is increase the price of diesel and allow FDI in retail and aviation. This passes off as a "reforms blitzkrieg" in India now?

[chetak]

Foreign lobbying got government moving on reforms, say experts

Not long back, the US Chamber of Commerce had claimed it influenced at least nine key Indian government policy decisions, including the rise in foreign direct investment (FDI) to 100 per cent in single-brand retail from the earlier 51 per cent. Lobby groups from abroad, particularly the US, and their partners in India played a role in prompting the government to go for a slew of reforms on Friday, experts said.

Rajiv Kumar of the Federation of Indian Chambers of Commerce and Industry said it was undeniable that international lobbies also had some pressure. He contested the hypothesis, though, that only their pressure worked. “It is very difficult to ascertain whose pressure is more, as even the Indian business community has been calling for reforms for a long time now,” he said.

PRESSURE POINT

The US Chamber of Commerce claimed at least nine key govt policy decisions, including FDI reforms, were influenced by it
Analysts say that the branding of the prime minister as an "Underachiever" by Time magazine or as a "tragic figure" by the The Washington Post were part of the same concerted campaign
The recently announced FDI policy has been now hailed by The Washington Post as "the biggest and arguably toughest economic reforms since Prime Minister Manmohan Singh took over in 2004"
In May, US Secretary of State Hillary Clinton, who is also a former director of the global retail giant, Walmart, was on an India visit and met West Bengal Chief Minister Mamata Banerjee
FDI in multi-brand retail was among the items believed to be discussed by Clinton with Banerjee

[Arjun]

The Gujarat Miracle

The Gujarat miracle: There is no denying the major economic advances the state has made under Narendra Modi
Arvind Panagariya

I recently wrote about why the accomplishments of chief minister Nitish Kumar - that at last bring hope to Bihar - could not be underestimated. Today, i turn to Gujarat, which has been generally more prosperous in the post-Independence era and has performed impressively under chief minister Narendra Modi. Critics who insist on viewing everything related to Modi through the 2002 lens and, thus, fail to separate their economics from politics have fallen short of 20/20 vision.

Begin with growth. The relevant comparison here is with larger, richer states. Based on per-capita Net State Domestic Product (NSDP) in 2009-10, Gujarat ranks third, behind Maharashtra and Haryana but ahead of Tamil Nadu, Kerala, Punjab and Karnataka in that order.

Modi came to office in October 2001. In the following eight years spanning 2002-03 to 2009-10 (2002-10), NSDP grew at 10.5% annual rate in Gujarat and at 10.1% in the nearest competitor, Maharashtra. The rate during the preceding eight years, 1994-02, was 5.9%, behind only Haryana's 6.3%. Modi inherited a vibrant economy and has taken it to new heights. Gujarat had ranked sixth in terms of per-capita NSDP in 2002-03. Outperforming Tamil Nadu, Kerala and Punjab, it moved up to the third spot in 2005-06 and has remained there.

While the performance in agriculture has received the greatest attention, perhaps the most exceptional feature of Gujarat's success has been the performance of manufacturing. Compared with the national average of 15%, manufacturing in Gujarat accounted for 27.4% of the Gross State Domestic Product (GSDP) in 2009-10.

Critics might say that this proportion has risen only one percentage point since 2002-03. But given the uphill battle manufacturing faces in India, even maintaining the share at this high level is a challenge. In all comparator states, this share has been below 20%. Moreover, with the exception of Punjab, none has been able to raise it by more than a percentage point during 2002-10.

With a high and rapidly rising per-capita income, it should come as no surprise that Gujarat has a significantly lower poverty ratio than India as a whole and it is fast declining. Based on the Tendulkar poverty lines and methodology, overall poverty in Gujarat fell by only six percentage points during 11 years between 1993-94 and 2004-05. But during just five years between 2004-05 and 2009-10, it fell an impressive nine percentage points. In 2009-10, the poverty ratio in Gujarat at 23% was almost seven percentage points below the national average.

The decline in poverty has been observed across all major social groups. My ongoing rese-arch with Megha Mukim finds the poverty ratio for the scheduled castes tumbling from 40.1% in 2004-05 to 21.8% in 2009-10. The decline has been less sharp for the more numerous scheduled tribes (ST) - from 54.7% in 2004-05 to 47.6% in 2009-10. Given the continued high absolute level of ST poverty, the state must think of imaginative ways to bring the fruits of growth to the tribal belts.

Critics frequently deride the exceptional growth in Gujarat by pointing to its lack of achievement in the social sectors. But they often do so by focussing on selective indicators. A consideration of a broad set of indicators hardly offers an indictment of the state even in social sectors.

The critics' case is particularly weak in education. Gujarat added 10 percentage points to the literacy rate during 2001-11, more than any other comparator state. At 79.3%, the literacy rate now stands one percentage point behind Tamil Nadu and three percentage points behind Maharashtra. Indeed, once we take into account the low literacy level of Gujarat at Independence, its progress looks more impressive than that of even Kerala.

To eliminate the bias that may result from differences in initial levels of literacy in evaluating the improvements in literacy, compare the three-decade progress in Gujarat during 1981-2011 to that in Maharashtra during 1971-2001 and Kerala during 1951-81. The initial literacy rates in these states during these periods were almost equal: 45% in Gujarat in 1981, 46% in Maharashtra in 1971 and 47% in Kerala in 1951. But three decades later, larger improvements by Gujarat had taken it ahead of both Maharashtra and Kerala.

On a longer-term basis, Gujarat's gains in the vital health statistics are nothing to scoff at either. If the levels of these statistics compare unfavourably, it is because it began the race with a disadvantage. In life expectancy, it began a year below the national ave-rage during 1970-75 and remained exactly there in 2006-09. Infant mortality rate per thousand live births in Gujarat exceeded the national average by 15 in 1971 but fell below it by two in 2009. Under-five mortality and maternal mortality rates in 2006-09 were, likewise, well below the national average.

Data do show Gujarat performing worse than the national average in child nutrition between 1998-99 and 2005-06, the latest period for which consistent data are available. The government can do much social good by targeted action in this area. The good news is that with high growth, the state has the necessary revenues to successfully address the problem.

While one can selectively poke holes in nearly every success story, taken as a whole, it is difficult to remain unimpressed by what Gujarat has achieved. I would be only too happy if its economic success spread next door to my home state, Rajasthan.

The writer is professor of economics at Columbia University.

[subhamoy.das]

Not sure how many you saw Jaswant Singh's press-conf tearing into MMS speach. He made some real good points. One of the points he made was that this is no reform at all! FDI has been left at the mercy of states ( so no credit for this ), diesel prices hike is a admin step ( decontrol would have been the real reform ) and FDI in civil aviation was already there and all they have done is to allow foreign airlines to join which will help only 1 airline the kigfisher. He clearly outlined that all the wasteful expenditures and scams have put pressure on the govt finances and as a direct result of foreign pressure is now out t o correct the situation by cutting co-pays and raising tax both of which hits the urban middle class.

I personally feel that we are facing a Europe like situation. Populism ( read SCAM and NREGA etc ) screwed the economy and now the economy has to hit back ( read REFORM ) at the the populism. Eventually the economy has to win or else people of the country are doomed. You can run from REFORM but you cannot HIDE. REFORM se picha choorana muskil nahi namoom keen hain!

[nakul]

I am not sure how FDI in aviation serves our interest. The people can easily buy tickets from foreign airlines while flying outside the country. Is this an opportunity for foreign players to invest in the domestic airline industry?

[RamaY]

Prime Minister Manmohan Singh's team behind the recent reforms blitzkrieg
]

First of all PC's blitz taking deinvestment plan is limited to LIc of India which was asked to put aside Rs 20000 crore for divestment program just a couple of weeks before FDi announcement.

I don't know if this can be called divestment, because LIC is a GoI entity (for more reasons than less).

This is a pony show to bring FDI in retail.

The key points are
1. Is FDi in retail the singular and most important measure to kickstart the economy?
2. Is pseudo-emergency style the only way to bring the economic reforms?
3. How opening up small-savings schemes to be invested in ETFs and other stock market products? What did we learn from 2008 meltdown in USA? Or is it to skim off small savings in india by FIIs?

Or are we at a stage where any small measure of movement from MMS and UPA are so important that we do not care whether they are done at the cost of democracy, parliament and long-term national interests?

[RamaY]

Well, home grown companies had their time under the sun to get their act together. Entry of foreign retailers was inevitable and they should have prepared for it. I'm sure many already have.

But seriously, all this talk of mom and pop shop-keepers going out of business and other such sob stories are quite ridiculous. Please educate me, why did not these businesses go bust when Big Bazaar opened up in India? BB is a bigger threat than a Walmart because it has formats which allows it to park right in the middle of a kirana stores. How come no one is complaining about the likes of them?

And please, one sincere advise - don't extrapolate the models in foreign countries into India. There is a big elephant in the room which everyone seems to be missing - Indian Consumer. He is more smart than you give credit to him...they will go some place only if it makes absolute sense - and not because it is Walmart or any other entity.

Another question to all the learned people on this thread - Now, I have never been to a Walmart but have shopped at Metro Cash & Carry. In the entire set-up, in which areas does the items sold by Walmart overlap with those of Kirana stores which everyone wants to save? What is it that I will choose to buy from Walmart which my Kirana store already sells and hence, it will be curtains for him?

I would love to be educated on these points.

A small lesson.

If only MMS were to provide the $10b he gave to EU to local industry to kick start modernizing indegeneous retail supply chain, like they did with UID program.

If only MMS spent the Rs 300,000 crore they spent on NREGA program to develop Indian agri-industry by providing education, training, tools etc to <10 crore farmers.

If only MMS preempted the numerous scams that cost > lakhs of crores of exchequers money and induced those funds into Indian economy, infrastructure and technology.

[svinayak]

Well, home grown companies had their time under the sun to get their act together. Entry of foreign retailers was inevitable and they should have prepared for it. I'm sure many already have.

And please, one sincere advise - don't extrapolate the models in foreign countries into India. There is a big elephant in the room which everyone seems to be missing - Indian Consumer.
.

You must be kidding. Look at the Indian policies since 1950 - Socialism and state control, nationalization, PSU, Govt funds into industries, monetary policies etc. This has resulted in Indian economy which is stunted. It has made the home grown companies small and uncompetetive in the world. With high interest rate what does India companies do - they have no other choice.
Home grown companies naver had their time.

In most countries the home consumers mostly support the home based companies. They do not welcome foriegn companies unless there is a people bond with those foriegn countries. Indians were denied entry to these countries until recently and these countries want to export to Indian consumers.

[chetak]

I am not sure how FDI in aviation serves our interest. The people can easily buy tickets from foreign airlines while flying outside the country. Is this an opportunity for foreign players to invest in the domestic airline industry?

We are going to regret this soon.

The only airline companies flush with money are all......err, islamic

and radio calls to ATC will end with a mandatory insha allah?

[Abhijeet]

Indian retailers do not have access to 0% cash. They are all loaded with debt and are waiting to sell out to Wal-mart type folks. People will be surprised how quickly this take over will go.

We aren't talking about Chinese companies subsidized by the government. Why would companies like Walmart or Tesco have access to 0% cash? If they have lower capital costs, it's because they are more credit worthy than Indian companies. Why not reap the benefits of that lower cost of capital through lower prices for Indian consumers?

So the solution to Indian companies being so in debt that they would sell out to foreign companies is...what? Let them go out of business? Wouldn't that put thousands of people out of jobs, the very thing that all the anti-FDI folks seem to be so concerned about?

There is enough PE money available in India that companies in debt could raise funds if there was a business case for it. If they are not able to do so, I fail to see why having them go out of business is better than them selling out.

[amit]

If only Moorkh Mohan Singh were to provide the $10b he gave to EU to local industry to kick start modernizing indegeneous retail supply chain, like they did with UID program.

In the interest of a proper discussion it would be great if there's less rhetoric and more substance.

For example what exactly is this beast: "indigenous supply chain"? Who operates it, who owns it and who builds it, for example. If the partnership between Bharti and Walmart builds a supply chain in India which buys direct from the farmer and sells the produce at stores all across the country and thus eliminating the middleman - would the supply chain be "indigenous" of "phoren"?

I understand that the Food Corporation of India is a socialist example of this "indigenous supply chain". Are we dreaming of those good old days?

I know it will take some time for folks to get used to but in today's India $10 billion is small change and if that's all it took to build a pan Indian supply chain, every indigenous retailer, like Reliance for example, would have had one. So comparing MMS giving bhik to EU with building up a modern retail network is rhetoric pure and simple.

Local retailers have been around for more than 10 years, if they could have built their own supply chains they would have done it a long time ago. It's interesting that despite organised retail being present in India, the their share in the total retail market has gone down from 25 per cent to around 17 per cent. I guess this must imply that kiranas have gone out of business by their thousands, na?

The point about Walmart sourcing more than 50 per cent of their products from China, is another bogeyman. Sure they would if they could - that's where we need to watch out for the exact legislation wording when the deals get signed. But the sourcing from China is a separate issue. If anyone thinks dumping from China with the help of unscrupulous Indian businessmen is not a problem - well then I've got a huge discount of all the British Steel that went into Howrah Bridge - please ping me if you're interested in buying.

This fear that Walmart will take over the country is very similar to the type of hysteria we've seen during the different episodes of liberalisation. We heard about how India's security would go for a toss when foreign and private Indian companies were allowed to run mobile networks in India. We heard about how the local automotive industry would be decimated when foreign car companies were allowed into India. Heck we even heard the Bombay Club and its minions tell us in the early 1990s how the Indian economy would be destroyed by the liberalisation measures taken in 1992 which led to the dismantling of the Licensing Raj.

The present brouhaha over 51 per cent FDI in retail, same whine in an old bottle.

[amit]

We can only look at the evidence on the ground.

Walmart was defeated in SK & Germany.
Walmart crushed Mexico and is slowly becoming dominant in Brazil.

Are we Mexico or Germany is the question.

One small correction Theo. As I've pointed out in a previous post, Brazil is doing quite well and local retail giants are pretty active and strong as is Walmart - peaceful coexistence.

And in China, despite being present (in standalone retail format, that is 100 per cent owned) for the past 12 years, Walmart China is still running at a loss.

The point is in terms of global operations Walmart is either one of many strong players or it has been a total failure.

The kind of domination that it has in the US and to a certain extent in Canada has not been replicated anywhere else.

[Singha]

http://www.dnaindia.com/analysis/column ... il_1741787

The myth of big retail
Sreenivasan Jain | Agency: DNA | Monday, September 17, 2012


Sreenivasan Jain
Of all the big reforms announced by a suddenly galvanised UPA, the one that has predictably caused the greatest political tremors is allowing the entry of multi-brand retailers into India: Wal-Mart, Tesco, Carrefour and the like. The strong opposition to the entry of the big boys of global retail is as exaggerated as the claims made by the government of the benefits they will bring. Both the pro- and anti-retail lobbies are wrong.

For starters, India has had big or organised retail for about 15 years now, not a small stretch of time.Some of the biggest Indian corporates are in this space, like Reliance, the Birlas, Godrej, RPG (Sanjeev Goenka Group) and Kishore Biyani’s Future Group. Despite this, organised retail is only 5% of the Indian retail market. The remaining 95% is still unorganised. Every one of the big players is posting losses. Last year, Reliance Fresh posted a loss of Rs 247 crore, Bharti posted a loss of Rs 266 crore, and Aditya Birla group, which runs the chain of More supermarkets, posted a loss of Rs 423 crore. Some retail chains have actually shut down, like Subhiksha which at one time had almost 1,500 outlets. Which is why India is one of the few countries where domestic retail chains are actually lobbying for the global giants to come in!

Why on earth would you actually fight to increase competition? Officially, Indian retailers will lapse into corporate jargon like the global players ‘will add to the value chain’, ‘will increase capacity’, and so on. In reality, it’s an open secret that many of the Indian players are hoping that the global chains will bail them out either through joint ventures or just outright takeovers.


Some argue that the Indian chains have not worked because they don’t understand retail. That their parent companies have other core specialisations like oil refining or making cement or tyres. This argument could be applied to companies such as Reliance or the Birlas, but what about India’s original big dukaandaar, Kishore Biyani? Few will disagree that someone like Biyani has a greater sense ofthe middle class Indian consumer’s shopping habits than, say, Carrefour. In an interview we once filmed in his flagship Big Bazaar in Mumbai’s Phoenix Mills, he explained why the store design actually encourages overcrowding. He called it his ‘butt and brush’ theory, a somewhat cute metaphor to describe how Indians actually prefer to shop in an overcrowded environment (where their butts can theoretically brush against each other). And yet his Future Group, the parent company of the Big Bazaar chain, is in deep trouble with debt on its books of over Rs 3,000 crore.

The real reasons why big retail hasn’t worked in India are simple.

One, a lack of commercial space. Most Indian cities, presumably the first port of call for the Wal-Marts and Tescos, don’t have the kind of aircraft-hangar size spaces that these chains need. Whatever space does exist is limited and very expensive, taking away the advantage of economies of scale needed to make big retail viable.

Two, Indians just shop differently. We are used to buying in small batches, not making weekly or monthly runs as is the practice in the West. We prefer walking out of our homes to shop, not driving all the way out to a hypermarket in a distant suburb. Let’s face it, as Indian shoppers, we are utterly spoiled for choice by a range of price-sensitive (and colourful) retail options that include everything from street vendors to kirana stores, thela-wallahs and Mother Dairy outlets. Almost all of whom have no qualms in delivering even a matchbox to our doorstep. When Reliance and the Birlas couldn’t take on this vast, fragmented and inventive mosaic that is Indian retail, do Wal-Mart and Tesco have a better chance ?

Which is why the government’s claims that opening up FDI in retail will bring in 600 billion dollars of investment (the figures keep changing) is utter bunkum. As one of India’s leading retail sector gurus told me, the silence is deafening — not unlike when India opened up FDI in power and infrastructure, hoping for a stampede of foreign investment which never quite came.

As for those political parties claiming to get falsely outraged on behalf of the small dukaandar, here is a reality check: there is NO empirical data to suggest that the rather feeble entry of Indian big retail over the past decade and a half has led to shutting down of corner stores. In fact government data suggests the reverse. From 2005 to 2009, organised retail has shrunk from 27% to 15%, while unorganised retail has held the course at a steady at 15%.

Having said that, it’s the other end of the chain which needs the greatest attention: the Indian farmer. It’s true that the prospect of organised front-end retail will liberate him or her from an oppressive dependence on middlemen-dominated mandis. And it will create a cold chain network that will reduce wastage and add value to farm produce. But for that too we don’t need Wal-Mart or Carrefour. We already have in this country a state-of-the-art network that sources from three million farmers daily, stores their product in cooling vats, converts it into a range of terrific products and transports it in refrigerated trucks to stores across the country. It doesn’t involve any foreign investment or technology. It’s owned collectively by the farmers who make the product. Everyone gains: the farmers, the members of the network, and the consumer. Our political parties will be well advised to spend less energy on empty blather about of the benefit of international retail chains. Or staging dharnas against their arrival. Instead, let them encourage the spread of this network in the states where they rule. The network is called Amul. And it was invented by Verghese Kurien.

Sreenivasan Jain is Managing Editor, NDTV.
He anchors the ground reportage show, Truth vs Hype, on NDTV 24x7

[Singha]

btw this co is one of the cold storage chains in the country. I have seen their vans outside total supermarkets
http://www.coldex.in/

we already have such chains, though more is always welcome.

[amit]

We can modernize our food supply chain without FDI through our own efforts. First lets fix that problem. The only reason why it hasn't happened so far is because our policies haven't focused on that yet at all.

Nandy babu,

Can you specify how "we" can modernize the supply chain? Who is this "we"? The GoI? Do you think it's the GoI's business to go and start building food supply chains? If the answer is yes, why is the Food Corporation of India the mess that it is?

The point you need to note is that a supply chain - for whatever product - can never be a standalone entity. It has to be linked to a consumption point at one end. Take Apple's supply chain for example. Apple via its contract manufacturer Foxconn, sources thousand of products - which include many harmful chemicals - from all over the world. All these are used to produce the iPhone5 or and other Apple products. A lot of people and a lot of companies make money from this supply chain. Now ask yourself, if there was, for example, zero demand for the iPhone, iPad and whatever, do you think this supply chain would even survive one day?

Apart from designing great products what Apple does is it creates a demand for its product and then tightly controls its supply chain so as to produce these products with the highest quality control possible and at the cheapest price possible. Apple's supply chain is reckoned to be the most efficient in the world. Now do you think it would survive even one day without it's total link to Apple?

The principles are the same for organised retail. Walmart may be evil but they are reputed to run the most efficient supply chain in the retail world and that's the reason they are the world's biggest company by revenue. And that supply chain is so efficient not because Walmart uses slave labor but because they have the best management capabilities, technical knowhow etc that goes into making the supply chain what it is.

The same would apply in different degrees to other global chains like Tesco, for example.

So the point is, bad as it may sound, we don't have the indigenous capability to build a world class supply chain and we need, initially at least foreign knowhow. I'm sure within a decade this knowhow will be available in house but if we are serious in stopping wastage, especially in agri produce we need foreign knowhow.

[amit]

As one of India’s leading retail sector gurus told me, the silence is deafening — not unlike when India opened up FDI in power and infrastructure, hoping for a stampede of foreign investment which never quite came.

Sreenivasan's article is a good read and pretty fair commentary IMO even though its a bit dated given how fast moving the story is. It's difficult to reconcile the comment above with this:

Walmart Pounces As India Opens Market To Foreign Retailers

[Pratyush]

^^^

This whole FDI in retail is drama is a distraction. The real meat come from generating Jobs, Infrastructure(Roads, railways,airports), recapitalizing the SEBs, Agricutlure & Labour reforms. In the absence of moves in the above mentioned segments. We are not really going to benefit from the and FDI.

[member_20317]

Why would companies like Walmart or Tesco have access to 0% cash? If they have lower capital costs, it's because they are more credit worthy than Indian companies. Why not reap the benefits of that lower cost of capital through lower prices for Indian consumers?

The 0% cash is because their government was inept in managing their economy exactly like our own which is causing a different kind of imbalance.

So the solution to Indian companies being so in debt that they would sell out to foreign companies is...what? Let them go out of business? Wouldn't that put thousands of people out of jobs, the very thing that all the anti-FDI folks seem to be so concerned about?

Request you to elaborate.

There is enough PE money available in India that companies in debt could raise funds if there was a business case for it. If they are not able to do so, I fail to see why having them go out of business is better than them selling out.

If a case cannot be made for raising 'Debt' there can hardly be one for raising 'Private Equity' which actually works out 5%-10% more.

[member_20317]

http://www.dnaindia.com/analysis/column ... il_1741787

The myth of big retail
Sreenivasan Jain | Agency: DNA | Monday, September 17, 2012

For starters, India has had big or organised retail for about 15 years now, not a small stretch of time.Some of the biggest Indian corporates are in this space, like Reliance, the Birlas, Godrej, RPG (Sanjeev Goenka Group) and Kishore Biyani’s Future Group. Despite this, organised retail is only 5% of the Indian retail market. The remaining 95% is still unorganised.
<snip>
As for those political parties claiming to get falsely outraged on behalf of the small dukaandar, here is a reality check: there is NO empirical data to suggest that the rather feeble entry of Indian big retail over the past decade and a half has led to shutting down of corner stores. In fact government data suggests the reverse. From 2005 to 2009, organised retail has shrunk from 27% to 15%, while unorganised retail has held the course at a steady at 15%.
<snip>
Every one of the big players is posting losses. Last year, Reliance Fresh posted a loss of Rs 247 crore, Bharti posted a loss of Rs 266 crore, and Aditya Birla group, which runs the chain of More supermarkets, posted a loss of Rs 423 crore. Some retail chains have actually shut down, like Subhiksha which at one time had almost 1,500 outlets. Which is why India is one of the few countries where domestic retail chains are actually lobbying for the global giants to come in!

Singha ji, your inputs combined with inputs from amit ji, yield the following picture.

Value of Organised Retail Turnover in India per year =(500*1,000,000,000)*5%*50/1,00,00,000 = INR 125000 Cr. per year
Losses quoted by you which is basically the big 3 of organized retail = ~INR 1000 Cr
Losses as a percentage of Industry turnover works out to about 0.80%
I would increase this figure to 2% (I have doubts on every input).

Still can 2% be any justification for any Indian Company to heave off its business to a foreign company.

Sir, these guys are well trained Indian Lalas. They have already worked out the SWOT of their businesses. They know the government will always be an ass and people will get led by this government into believing WTH. In such a situation they figure that it is best for them to just sell off their business at a premium that the foreign companies can pay and then again get put the investible surplus in businesses where the governance aspect is manageable for them. In effect if Kishore Biyani wants to sell out that has more to do with his ‘no-confidence’ in the governance structure of this country then with the health of his business. But Kishore Biyani is not what we should listen to. We should listen to his balance sheet which shows for Pantaloon a ROCE of ~14.5% and a net profit carried over of 572 Cr in 10-11 with Debt of 2173 Cr in books, the year before the heave off of some business. Inspite of this they have Investments of 2255 Cr. The debt could as well be to finance these investments.


So your following point in NDTV report needs support.

In reality, it’s an open secret that many of the Indian players are hoping that the global chains will bail them out either through joint ventures or just outright takeovers.

<snip>

And yet his Future Group, the parent company of the Big Bazaar chain, is in deep trouble with debt on its books of over Rs 3,000 crore.

The real reasons why big retail hasn’t worked in India are simple.

One, a lack of commercial space.
Two, Indians just shop differently.

Two more things I can agree on. See aapke aur hamare khayalat bahut milte-julte hein.

Having said that, it’s the other end of the chain which needs the greatest attention: the Indian farmer. It’s true that the prospect of organised front-end retail will liberate him or her from an oppressive dependence on middlemen-dominated mandis.

Note in fact Singha ji, the words used are ‘organised retail’ not ‘Foreign FDI vested companies’

Instead, let them encourage the spread of this network in the states where they rule. The network is called Amul. And it was invented by Verghese Kurien.[/b]

Singha ji, you are also a supporter of Federalism . Federalism is the talk of the town these days ever since GoI decided it cannot really lead anymore.

[Abhijeet]

Why would companies like Walmart or Tesco have access to 0% cash? If they have lower capital costs, it's because they are more credit worthy than Indian companies. Why not reap the benefits of that lower cost of capital through lower prices for Indian consumers?

The 0% cash is because their government was inept in managing their economy exactly like our own which is causing a different kind of imbalance.

What does this mean? Companies get 0% cash because their government is inept?

So the solution to Indian companies being so in debt that they would sell out to foreign companies is...what? Let them go out of business? Wouldn't that put thousands of people out of jobs, the very thing that all the anti-FDI folks seem to be so concerned about?

Request you to elaborate.

This is pretty clear. If Indian companies are in bad enough shape that they can't raise money to keep operations going, then they either sell out or shut down. The former is preferable since the latter will put many people out of work.

There is enough PE money available in India that companies in debt could raise funds if there was a business case for it. If they are not able to do so, I fail to see why having them go out of business is better than them selling out.

If a case cannot be made for raising 'Debt' there can hardly be one for raising 'Private Equity' which actually works out 5%-10% more.

You are making my point. If there are companies which are unable to raise either debt or equity capital, whose money are they going to spend to keep running? Should the government bail them out? If not, then at least allow them to sell so they remain going concerns. Again, why is this a bad thing -- just because the new owners might be Tesco or -- horror of horrors -- Walmart?

-------------

Moving away from boring point by point rebuttals, there is a larger trend here -- a general atmosphere, very classically socialist Indian -- which neither helps entrepreneurs nor allows them the freedom to run their business as they see fit. The mob will decide how companies will run, who they are allowed to do business with and buy from, when and whether they can exit their loss-making businesses.

This mode of thinking says to entrepreneurs: Good infrastructure? Nah. Easy labor laws? Forget about it. A skilled workforce? Train them yourself. But if you want to sell your company to whoever you want: you'll have to get permission from a dozen people who never helped you when you were trying to keep the business going.

If loss-making Indian companies want to sell out to Walmart, who are the posters of this forum to say that that is a bad thing? Are you willing to put in your own money to keep the companies running? So easy to armchair analyze everything and decree what the entrepreneur "should" do.

[member_20292]

One good way of generating revenue from cars on the road; toll.

1. Put cellphone chip in every new car that is manufactured from now hence.
2. Track said chip using triangulation, using existing cellphone towers. Count amount of km travelled by the car.
3. Charge money from chip like balance being cut from prepaid card.

4. Hence, the NH8 will automatically generate far more revenue for you than the road to jhumritalaya.

5. Ideally, NH 8 will get the more passenger km and thus the repair maintenance , new flyovers, new dividers, patrol police etc.

6. Simple capitalism. You want the road? Put your car where your mouth is. Drive. Automatically after a while, capital will accumulate for repair and maintenance of the road.

[RamaY]

For example what exactly is this beast: "indigenous supply chain"? Who operates it, who owns it and who builds it, for example. If the partnership between Bharti and Walmart builds a supply chain in India which buys direct from the farmer and sells the produce at stores all across the country and thus eliminating the middleman - would the supply chain be "indigenous" of "phoren"?

Amit ji

I am surprised that you ask this question. Govts all over the world set things in place not for the benefit of a single company/corporation. The indigenous supply chain mechanism doesn't mean GoI builds it and runs it like Walmart. It setups up the infrastructure, policies and checks/balances in the place and encourages and ensures that the industry follows the policy. for example

1. It can finance the cold-storage and food processing centers under the joint control of farmer-co-op groups. The structures exists already.
2. It can develop the infrastructure to connect all distribution centers, develop warehouses and given them on BOT or BO model.
3. Put in a policy to ensure that all the transactions are computerized for analysis, identifying malpractices etc., If they could integrate UID, farm-land geo-automization, pattadar-passbooks, electronic payments, cold-storage rentals/operations, warehouse integration systems etc., it is not that difficult to ensure proper transactions.
4. Integrate this with farm subsidies/insurance program.
5. Put a policy that all licensed Kirana and retail shops/chains go thru this warehouse system only for their purchases, even though from whom and for what price is up to retailer's discretion
6. Monitor the transactions for trends and out liars. adjust the policy accordingly.

GoI duty is to facilitate trade and development. Not to own it itself.

[amit]

Hmm,

Rama ji, I hope you do realise that supply chain is good, super or downright bad depending on how it's managed and run on a day to day basis. The question is, once the GoI builds this infra, who is going to run it? How do you prevent it from becoming another FCI? I'm sorry to say this, but you seem to be equating retail supplychains to hard physical infra like roads, ports and bridges. It's the GoI's duty to build hard physical infra. Govts all over the world do that. It's NOT the GoI's job to build and maintain retail supplychains. That does not happen even in Socialist Nirvanas.

[member_20317]

If loss-making Indian companies want to sell out to Walmart, who are the posters of this forum to say that that is a bad thing? Are you willing to put in your own money to keep the companies running? So easy to armchair analyze everything and decree what the entrepreneur "should" do.

eerr, citizens!!!
Is that answer good enough


For the rest of your post all I can say is you are seeing it as Left-Right divide. When that divide was settled in 90s. The cross-road we are standing on today is what we avoided addressing in early 90s. Indigenous-Foreign.

But then as somebody said all maya only.

[amit]

Also you talk of farmer coop groups. We have the best example possible in Amul. But do pause to think why Amul's supply chain is so successful. That's because Amul controls the whole process, from procuring milk to production of dairy products to branding, packaging and distribution. Note my previous post where I gave the example of Apple, same story with Amul. GoI can set up the world's best cold storages and other infra. But unless there is ownership from the process of buying from farmers to selling to end consumers it will just be a giant failure. Again look at the FCI example. What you suggest has been tried and dusted in Socialist Bharat.

[vishvak]

Also you talk of farmer coop groups. We have the best example possible in Amul. But do pause to think why Amul's supply chain is so successful. That's because Amul controls the whole process, from procuring milk to production of dairy products to branding, packaging and distribution. Note my previous post where I gave the example of Apple, same story with Amul. GoI can set up the world's best cold storages and other infra. But unless there is ownership from the process of buying from farmers to selling to end consumers it will just be a giant failure. Again look at the FCI example. What you suggest has been tried and dusted in Socialist Bharat.

To add to above, a question is how come the desi supply chains are not as successful as Amul? There has to be more reasons than simple trade infrastructure, for Amul uses the same state infrastructure that other desi supermarkets use.

How well has desi supermarkets helped poor farmers of India - how little or how big?

If a desi supermarket is competing with a foreigner supermarket, over a period of time would prices rise or fall, considering all the trade was done by super markets?

[amit]

Apart from all minute details about supplychains, one should remember that one of the conditions set for 51 per cent FDI is a hefty investment in creation of supplychains. I wonder why folks, who presumably ate not of the loony Left or Mamata Didi variety, so opposed to these $$$ investments?

[Abhijeet]

ravi_g, simple question. If an Indian retailer wants to sell out because they cannot keep the company going, would you prefer that they go under (like Subiksha) rather than sell to a foreign company? Or are you willing to put in your tax rupees into bailing the company out?

[paramu]

And in China, despite being present (in standalone retail format, that is 100 per cent owned) for the past 12 years, Walmart China is still running at a loss.

Important datapoint. How could they run 12 years while making loss? What is the strength of their deep pockets that help them eat such massive losses. Any normal business would have wound up long back.

[Theo_Fidel]

There is a difference between a Subiksha or a Reliance Fresh that has a domestic supply chain and minimal access to a globalised chain vs a Wal-mart that has massive foreign supply chain and relatively zero Indian supply chain.

We are not in the position to suffer another $50 Billion deficit to Panda, which would be trivial for Walmart. It would mean an outflow of $500 Billion over the next 10 years. More than enough to completely drain our Forex reserves.

Even a modest 10% Walmart market share of our $500 Billion retail trade would cause this. People are underestimating the challenges to our trade balance.

And yes, for those asking, Wal-mart has access to unlimited amounts of 0% cash.
-------------------------------------

Amit,

Walmart in Brazil is not so benign as you make out. Brazil is a massive importer of finished goods and an exporter of basic materials for a reason. Its domestic manufacturing is still born while its mining industry prospers exporting to Panda.

[member_20317]

Re. Abhijeet –

What does this mean? Companies get 0% cash because their government is inept?

Abhijeet ji, so many pages have been written on this on other threads. I carried belief in a lot of it hence my stand that 0% cash in west is something that has poor governance at its core. My stand that high interest rates in India are also due to a government asleep at the wheels is derived from the fact that this kind of situation also represents a new kind of imbalance.



Re. Abhijeet -

You are making my point. If there are companies which are unable to raise either debt or equity capital, whose money are they going to spend to keep running?

Abhijeet ji let me help you with some inputs

Public Equity is lowest cost route with highest risk of zero reward. Hence they take everything, at least legally speaking. Practically only the Majority Equity Holder with Management control take it all. It helps the cause of other investors if the value is unlocked via Capital markets. So it helps the economy if most of fund raising is done via capital markets.

Debt has a higher cost but lower risk (secured) hence they do not get anything on business upside.

Private Equity is an mongrel. Because:

• Legally it is structured like any other Equity. But often times backed by (a) Shareholders agreements &/or (b) Buy-in, into the club earlier occupied solely by the Majority Equity Stakeholder.

• Commercially it is a debt arrangement driven by an IRR. Often you will not be privy to the IRR calculations and Valuations used. Private Equity Funds have zero understanding of running businesses except their own money lending business. They are interested in maximizing their gains. Since they come with all the MBAs/IITs so they think their model arrangements/templates can plug all/most holes and so they will be able to predict the IRR. After the Closing Date the only thing that remains is the IRR. This IRR is mostly dependent on how badly the Investee company wanted the money. Because these guys have deeper pockets compared to everybody else with a correspondingly stronger negotiating position and because these guys are approached once it has become impossible to use the other two fund raising options so they are able to extract on paper at least bigger returns then both the Public Equity holders and Debt holders. This is the most expensive route of raising money. Saving grace is these guys take seemingly the most amount of risk at what appears to be the worst possible time.


Now with such background let me restate our exchange.

You said if Indian Companies cannot Raise Debt they should raise Private Equity.

I said Private Equity is more expensive then Debt so if you cannot raise debt you cannot raise Private Equity unless off course you are willing to mortgage your kacha-baniyan and whatever it protects. This is an indication that I am alluding to a necessity to facilitate Public Equity raising. That being the only cheaper route. Suggesting Private Equity is somewhat like asking why the poor cannot have cake instead of bread.




Re. Abhijeet -

This is pretty clear. If Indian companies are in bad enough shape that they can't raise money to keep operations going, then they either sell out or shut down. The former is preferable since the latter will put many people out of work.

ravi_g, simple question. If an Indian retailer wants to sell out because they cannot keep the company going, would you prefer that they go under (like Subiksha) rather than sell to a foreign company? Or are you willing to put in your tax rupees into bailing the company out?

Thanks for clarifying. That helped and I will try to answer the question as best as I can.

Your example says:
X (an Indian) wants to sell his business because X is making losses.
Y (a Foreigner) wants to purchase the business because Y is making profits.

Well easy X should sell Y should buy. Easy because it is designed to be answered so.


Now let me put the fly in the ointment by giving you some real life inputs. I am not expecting an answer because these things take a lot of effort to get decided over and nobody can do justice to these even after writing reams of paper. These I put forth only to enable other people to think if life is really so straight forward as you have put forth.

Input 1 - Losses can be carried forward to be set off against expected future Incomes.
Input 2 – Y willy nilly has to rely on Indians workforce with all their strengths and limitations to run his newly acquired business. Expats are basically overpriced and do not offer commensurate benefits.
Input 3 – The cost of establishment of a business by X is so great that Y is unlikely to ever change much of it.
Input 4 – The cost of raising funds and government policy was already so damned against X being able to continue his business that he should not have been out of business in the first place had he been given a fair opportunity.
Input 5 – Y has access to capital at damn cheep rates.
Input 6 – There is substantial amounts of public monies invested in X by way of Debt and Equity. Any scheme of arrangement and compromise or Substantial Acquisition of Shares or Takeover is by its very nature a special arrangement between the ‘Major Equity Shareholders’ and Y. How this impacts your simple question should be apparent from the fact that any such arrangement will be the subject of enquiry/interest for the High Court, SEBI, Ministry of Corporate Affairs, Income Tax Dept., Prescribed Stamp and Registration Act authorities, possibly RBI and District Sub-Registrar and a few other tangentially concerned departments.
Input 7 – The shareholders of Y also expect returns and if they do not get it then either they may indulge in firesale of their stocks or simply rating the whole economy as a basket case.
Input 8 – The management and employees of X have actually invested a lot of time and effort building up the business, much of which is entirely salvageable with bridge loans.
Input 9 – The owner manager of X actually going to get a huge premium sourced through various tax efficient mechanisms that can simply not be matched for the other shareholders. In fact avoiding having to pay the same consideration to the other shareholders is the main consideration.
Input 10 – The Vendors remain the same or pretty much the same.
Input 11 – The hard infrastructure remains the same or pretty much the same.


#11 is a shubh number. I think I can leave you with this much.



Also Abhijeet ji, please do not feel compelled to reply if you feel getting into long posts is not the right way. Needless to say I write most of what I write for the benefit of many else who would chance into a public forum.

[RamaY]

Amitji

What are the benefits expected from FDI in retail?

1. FDI - in what? Real Estate or Procurement process or infra or what?
>> How is it different from say a Govt induced fund of $10b instead of loaning the to IMF/EU?

2. Supply-chain efficiencies - What is the supply-chain that a WalMart for example will setup?
- Isn't it the procurement channels, that too if Walmart buys from locals, and associated infrastructure? If it is the storage and distribution system is walmart expected to build nationwide infra or only to augment its stores? Why cant GoI encourage private industry in this area like it has been doing in Solar/Alternative Energy field?
- Would walmart setup factories and establish new labor laws etc.?
- Or is it the negotiation power that walmart brings? Isn't it a negative thing to put our farmers talking to Walmart directly?

what else?

[amit]

And in China, despite being present (in standalone retail format, that is 100 per cent owned) for the past 12 years, Walmart China is still running at a loss.

Important datapoint. How could they run 12 years while making loss? What is the strength of their deep pockets that help them eat such massive losses. Any normal business would have wound up long back.

Yes it's an important data point but only important if read with another important data point and that is China is a major procurement centre for Walmart. The losses that Walmart's domestic operations in China incur is covered by its procurement business. And that is why Walmart exited from South Korea and Germany after suffering losses but still remains in China.

It's useful to remember that at the end of the day Walmart is a public listed company and it cannot wantonly waste money.

[RamaY]

After MoorkhMS reminds us that we are back to 1991 situation (that is his achievement after 8 years at helm - taking the country 20 yrs back) unless we listen to him, Now the congress central minister for woman welfare tells us to settle with chai-biskut and stop spending money on marriage functions. Remember the paki controls on number of dishes in marriage feasts?

We entered the new level of == with Pakis

[amit]

There is a difference between a Subiksha or a Reliance Fresh that has a domestic supply chain and minimal access to a globalised chain vs a Wal-mart that has massive foreign supply chain and relatively zero Indian supply chain.

We are not in the position to suffer another $50 Billion deficit to Panda, which would be trivial for Walmart. It would mean an outflow of $500 Billion over the next 10 years. More than enough to completely drain our Forex reserves.

Even a modest 10% Walmart market share of our $500 Billion retail trade would cause this. People are underestimating the challenges to our trade balance.

And yes, for those asking, Wal-mart has access to unlimited amounts of 0% cash.
-------------------------------------

Amit,

Walmart in Brazil is not so benign as you make out. Brazil is a massive importer of finished goods and an exporter of basic materials for a reason. Its domestic manufacturing is still born while its mining industry prospers exporting to Panda.

Theo,
It's not about whether Walmart is benign or not in Brazil. The fact remains that Santiago-based Cencosud is doing exceedingly well and increasingly challenging Walmart in Brazil.

And if you think that Brazil's domestic manufacturing is "still born" because of Walmart then boss you give the American company more credit than is due. First of all you point about domestic manufacturing in Brazil being "still born" is inaccurate. However, since that would be OT for this thread I'm not going into details, we can discuss in any other thread if you wish. Brazil's manufacturing "woe" if you wish call it so is because of its commodities export addiction which has nothing to do with Walmart. This addiction of digging the earth and bringing out stuff and sell it is the bane of industrialisation in many countries. Just look at the Middle East (oil), Australia and also for the matter Brazil. But to credit Walmart for that is...? Well incredible leap of faith.

--------------------------------------------------------------------

Regarding your math about Walmart, I’m afraid you’ve got the calculations overtly pessimistic. The GoI has mandated that at least 30 per cent has to be locally procured. Now assuming, like you are, that Walmart imports the rest 70 per cent from China (a highly unlikely scenario given that this does not take into consideration the peculiarities and preferences of Indian consumers) then you’re assuming that Walmart India would have a turnover in the region of $71-72 billion which would put Walmart India in the ballpark of Tata and Relaince in terms of revenue generation!!! That’s 14 per cent of the market. Considering the fact that organised retail is just around 17 per cent of the $500 billion, you are in effect saying Walmart will control 82 per cent of organised retail!

Now if that happens then most of the existing imports from China - you know stuff like air conditioners, bicyles and stuff, that add to the existing trade deficit, would just be channelled via Walmart.

Bottomline, you’re calculation of Walmart controlling 82 per cent of the organised retail market is way off since it will take considerable effort to get the percentage of organised retail to go up from the figure of 17 per cent. You also need to note that when domestic organised retail chains were allowed their share used to be 25 per cent, so the percentage has actually gone down.

Also you’re point about another $50 billion trade deficit with China because of Walmart falls into the category of “the sky is falling, the sky is falling” rant.

[amit]

Here's something I posted earlier this year, which I think is relevant to the current debate:

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

Link

[amit]

Folks, please indulge me. I think this is another previous post that is relevant to the discussion here:

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.

Link

[amit]

Amitji

What are the benefits expected from FDI in retail?

1. FDI - in what? Real Estate or Procurement process or infra or what?
>> How is it different from say a Govt induced fund of $10b instead of loaning the to IMF/EU?

2. Supply-chain efficiencies - What is the supply-chain that a WalMart for example will setup?
- Isn't it the procurement channels, that too if Walmart buys from locals, and associated infrastructure? If it is the storage and distribution system is walmart expected to build nationwide infra or only to augment its stores? Why cant GoI encourage private industry in this area like it has been doing in Solar/Alternative Energy field?
- Would walmart setup factories and establish new labor laws etc.?
- Or is it the negotiation power that walmart brings? Isn't it a negative thing to put our farmers talking to Walmart directly?

what else?

Rama ji,

It becomes very difficult to respond to a question which in effect is: What's the difference between GoI set up cold storages and Walmart's global supply chain. I could answer the difference lies in the $450 billion or thereabouts turnover the company earns but then you wouldn't be convinced.

I can only suggest - very humbly of course - that you do some reading up of what makes Walmart tick (that is besides the boilerplate of Walmart is evil, Walmart is bad, Walmart steals from hungry kids etc).

Gusthaphi maap, I wouldn't even dream of trying to point to the stuff that you need to look at. But nevertheless it's my humble request that you have a look at this small write-up on Walmart. Maybe this could be a start to your journey to learn about why supply chains are so vitally important and why they are so high tech and specialised that Governments have no business being anywhere near them.

[RamaY]

Amit ji

I too can do the same suggestion. Please stop doing Walmart is god postulation. Please do some reading using their financial statements at http://www.walmartstores.com/sites/annu ... Sheets.pdf

In 2011 walmart's sales were $418b and profit margin was $25b. Their 2011 Cash in hand was hardly $7b. Please tell us how much FDI Walmart can bring into India.

Now you tell me what push GoI can give to Indian retail industry by creating a $10-20b cash pool to kick start its domestic retail industry. I am sure any ordinary kirana store owner makes an annual revenue of 6-10 times the working capital, that would be a minimum of $100-200b upgraded retail market within India.

The world has changed a lot since the days of only a western business can raise capital. An SDRE Tata raised enough capital to buy Cairn. The same can be achieved in retail sector too without losing the market and supply chain control to the new EICs. If Walmart can raise $20b, so can any Indian business house of that size. The GoI is supposed to help its local businesses to gain that critical mass by providing initial lift.

The MMS govt is so fixated over its Western masters that it completely lost the sense of nationhood, governance etc., it made India a 52nd state of United States, 51st being Pakistan.