FDI in Retail

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amit
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Re: FDI in Retail

Postby amit » 18 Jan 2012 07:23

uddu wrote:It's not in India's interest to allow FDI in retail in the Present form. Even with 100 percent sourcing from India, I don't think any Walmart will source from ordinary farmer who makes 10 kg of Banana, das kilo of tomato.


I guess it's too much to ask for data to back up this assertion. :roll:

However, I would like to leave you with a thought. India has become the world's largest producer of milk within a decade without having huge and highly automated dairy farms that abound in the US, Europe and Australasia. You know why? That's because many small producers of milk - you know guys who have a couple of milch cows that produce less than 20 litres of milk - band together and provide their supply to cooperatives all over the country.

Why is this relevant here? That's because if you keep this model in mind and then look up how models such as ITC's e-Choupal works or even look at the annectode about Reliance and Arambarg (in West Bengal) potato farmers in my last post you'll understand what I mean. Walmart (gosh Sam Walton is a much remembered man, even though his company's international operations' performance has been under whelming to say the least!) or any other international and national organised retailer is not going to knocking on the doors of every marginal farmer who produces 10 kg of bananas or 10 kg of tomato. What they would probably do - and this is a model used all around the world - is link up a 100 (or more) of such farmers and tell them that they would buy their entire produce for, say three years. That then comes to 1,000 kg of bananas and 1,000 kg of tomatoes.

And you know what is happening now? Out of these hypothetical 100 farmers, maybe 50 are able to sell their entire produce with a marginal profit and maybe another 40 is able to sell a part of their produce while the rest 10 can't sell at all for various reasons like being too far from the mandi or not having the money to go all the way to the mandi etc. And the produce that can't be sold within a few days of being produced is thrown away because there is no cold storage facilities or if there are these small farmers don't have the money to store the produce. [That IMO is the main reason we have a criminal 30 per cent wastage in our agri sector]. OTOH, a three year contract (again see the Reliance example in Ashok Mallik's article, to see that this is standard) would in effect allow them to sell their produce even before its grown and it would become the responsibility of the organised retailer to pick up the produce, store it and ensure smooth delivery to the shop front.

Sorry boss, you can't be convince me that organised retail is NOT the way to go in India, unless you can provide empirical evidence to the contrary. I've said this to other posters here as well. I'm too cynical to take anyone's word for it. Organised retail is a must and FDI in retail is a logical step forward.

It's useful to remember that India's favourite car, Maruti, is made by a 100 per cent owned multinational, which effectively put out of business a 100 per cent Indian owned company Hindustan Motors. Now has that been a bad deal for Indians and the auto industry in general? Do Indian consumers get shortchanged because HM no longer has monopoly to build a tin can of a car whose price is fixed by the government? Are workers in the auto industry worse off, with less pay? Has the total employment in the industry slumped?

Or is it that FDI in auto brought about a transformational change which broke the cornyism and businessmen-political nexus and turned the industry into a worldclass sector and a major export earner.

What makes you and other think the same thing wouldn't happen in our retail sector which contributes 33 per cent to our GDP?

So it's loss loss of the nation and win win for corporates and the one who is investing.


I hope you realise how this point of yours contradicts your previous point. Given that a majority of Indian farmers fall in the 10 kg banana, 10 kg tomato producing category, if the corporates don't buy from them, just who would they buy from? I hope you're not scared that big brand retail is going to import veggies from China while incurring the transportation cost, while the same veggies rot in fields within a 100 km radius of the shops? That would take conspiracy theories to a new level.

it's jut the companies and the politicians who are into agri business. That's all. No one else will gain.


In a way you're partly right about the political angle. The rich (I mean stinking rich) but minuscule trader class which controls agri distribution in India (I call them mandi thekedars) are a smart bunch and politically very well connected. Which is why you see such diverse groups joining together to kill the proposal. Even BJP which proposed FDI in retail in 2004 is now voting against it. The same trader class is behind the opposition to GST. They protect their turf very efficiently.

We'll just be opening up another way to import while killing the Indian economy.


I call this East India Company syndrome. :lol:

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Re: FDI in Retail

Postby Dhiman » 19 Jan 2012 13:28

amit wrote:I call this East India Company syndrome. :lol:


Being vary of foreign influence is not unique to India, it exists in almost all countries. You cannot wish away history in India just like you can't wish away history in other parts of the world. In any case your position is probably more irrational given that you think there are no disadvantages despite loads of current day evidence (not historical evidence) to the contrary.

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Re: FDI in Retail

Postby amit » 19 Jan 2012 14:23

We heard about the "devastating" effect the Bharti-Walmart store in Jalandhar has had on small retailers, "who lost 40 per cent of their earnings" due to big, bad organised retail.

I decided to do some digging for information. In doing so I came across this very technical paper (I must confess I'm a bit of a nerd in these kind of things! :P ) Impact of Organized Retail on the Economy of Punjab on Google Scholar. [citation: Singh, Sanjeet, Sharma, Gagan Deep and Mahendru, Mandeep, Impact of Organized Retail on the Economy of Punjab (May 17, 2011). Available at SSRN: http://ssrn.com/abstract=1844510 or doi:10.2139/ssrn.1844510]

For those interested, the pdf is available for download here.


I'll just give the conclusion

To sum-up, the patterns of Punjab retail sector is changing now. Many retail investors
open their retail store and run those successfully and some other big players are ready to
invest in the retail sector in Punjab. The future of organized retail is quite good in big
cities but in the smaller cities orgnized retail is not successful to gain moment .
The second major conclusion to have come out of research is that the unorganized retail
is not much affected by organized retail. There is only 4% unorganized retailers who are
affected due to the opening of organized retail stores.{Note: This number tallies closely with the ICRIER number I cited earlier}
But now with the competition
getting stiffer, the unorganized retailers are also ready to inject more money to improve
their operations.
The third finding of the study is regarding the consumption behavior of
the consumer which is found not to have changed much due to opening of organized
retail but people get the day to day consumption things in a better and managed way.


I always feel kite flying is a fun pastime. But at the end of the day unless you can back up your points with references and data, don't be cross if you're (assertions) are not taken seriously.

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Re: FDI in Retail

Postby amit » 19 Jan 2012 14:38

A lot of folks under-estimate the amount of technology that's involved in organised retail and the supply chains that sustain it. They think its just a question of building a few cold storages and so we should welcome cold storage vendors instead of organised retail. :-)

Well here's a nice study on the type of technology involved all the way from RFID to database management, data warehousing and data management, to name a few.

However, considering that we were lamenting about the plight of the poor folks of Klang Valley in Malaysia and how they were "fleeced" by big bad Walmart, one quote from the study caught my notice.

In the developed economies, organized retail is in the range of 75-80% of total retail,
whereas in developing economies, the traditional retail sector dominates the retail business. The
share of organized retail varies widely from just 1% in Pakistan and 5% in India to 36 % in Brazil and
55% in Malaysia.


Mind you these are old stats because Brazil is now 75 per cent according to the Stanford study. Also, for those who don't know about Malaysia let me just point out that the Klang Valley, which comprises Kuala Lumpur and its surroundings, is the richest part of Malaysia and has the highest GDP. So much for poor people being fleeced by Walmart. Incidentally Walmart does not have a single hypermarket in Malaysia and has no plans to open any. See here

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Re: FDI in Retail

Postby Dhiman » 20 Jan 2012 03:45

amit wrote:I decided to do some digging for information. In doing so I came across this very technical paper (I must confess I'm a bit of a nerd in these kind of things! :P ) Impact of Organized Retail on the Economy of Punjab on Google Scholar. [citation: Singh, Sanjeet, Sharma, Gagan Deep and Mahendru, Mandeep, Impact of Organized Retail on the Economy of Punjab (May 17, 2011). Available at SSRN: http://ssrn.com/abstract=1844510 or doi:10.2139/ssrn.1844510]


Research isin't your strong point, is it? Anyone can write any crap and upload it to Ssrn.com and it will be picked up by google scholar. Do you even know the difference between a published peer reviewed paper and a blog uploaded on a website in form of a PDF.

You should really stick to things that you understand. Take your own advice and stop posting, you are just making a fool out of yourself.

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Re: FDI in Retail

Postby hnair » 20 Jan 2012 04:04

amit-saar, some thoughts. Your co-op to big-box retailer supply chain sounds promising. But my biggest worry is conformity that kills the diversity that makes India so cool.

eg: I like a certain type of mango that is not Alphonso, the current "standard mango". Currently, small farmers make sure I get that variety I love. Same for a specific chicken egg (bright orange yolk, that I am yet to see anywhere around the world). But with big-box retailers, they go by focus groups. The contract farmers (big and small) end up making one boring variety of mango because a few johnnies who were roped in for the focus group have no taste. The marketing will make sure even the majority who has taste, they fall in line. I mean how else can any one in US partake any drink sweetened with that insult to the taste buds called HFCS (not going into the health aspects of the syrup) ?

I mean, we dont have to do it that way because someone said "it is the best". Reason being Khanland's "progressive areas" are moving to Farmer's market formats and "less than 100 mile farms" to address these niche, but significant markets in a roundabout way (they couche it in "green" etc to market it to public). All the technological advances in production, inventory and distribution are still taken into account. Plus for a country like India, with not much refrigeration etc the less than 100 mile farm concept works rather nicely.

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Re: FDI in Retail

Postby amit » 20 Jan 2012 07:01

Dhiman wrote:Research isin't your strong point, is it? Anyone can write any crap and upload it to Ssrn.com and it will be picked up by google scholar. Do you even know the difference between a published peer reviewed paper and a blog uploaded on a website in form of a PDF.

You should really stick to things that you understand. Take your own advice and stop posting, you are just making a fool out of yourself.


I think you shouldn't worry about me making a fool of myself. :-)

Look closer, perhaps into your bathroom mirror, you'll find the fool.

You make wild claims and then you come up with obscure data to back it up. Let me list some of them in random:

1) Due to the Bharti-Walmart cash and carry, "poor" Jalandhar retailers have seen 40 per cent drop in their incomes. When asked for data to back it up you say it's all anecdotal somebody told. Yet I point to research - and I suppose you also think the ICRIER paper is also a piece of crap - you say anyone can write anything they want. A bit rich isn't. The point is it doesn't matter one bit how many peer reviewed articles you manage to find, none of them deal with the Indian situation. I think you're the one who needs to understand what it means to collect data to back views and assertions.

2) Supply chain: When I post stuff about the importance of supply chains and how they can reduce waste, you come up with some crap articles about cold storages, as if that's all there is to building a global, world class supply chain. Sorry mate you're seriously out of your depth. And, meanwhile, you studious ignore my question of how 30 per cent waste in agriculture can be minimised.

3) You talk about reforms in agriculture and FDI in retail as an either/or situation. You haven't been able to explain why both can't go side by side.

The list can go on but choro. I state again I don't care about research articles - how ever peer reviewed they may be - which deal with countries like Malaysia and the US. Your contention that experiences in those countries can be directly super imposed on the Indian reality is silly to say the least. If that were so then the evil Walmart wouldn't have been put out of business in places like South Korea, Germany and it wouldn't be scared of opening hypermarkets in places like Malaysia or be struggling in a place like China.

I'm sorry but you've been taken in by very subtle propaganda. Ashok Malik captured the essence of this propaganda and who are behind it very nicely in his article. The "poor kiranas" are just a bogey to hide the real guys who are worried.

Calling me a fool or saying I'm making a fool of myself doesn't alleviate the fact that you have absolutely no idea about the issue and every post of yours shows your ignorance.

PS: I'm not really interested in the mud slinging. I'll state again: Show me the data to back up your claims and I'll change my views. I think I've shown enough material to show that the bogey of organised retail is a well organised attempt by rich intermediaries who control the wholesale distribution of agri products in India to protect their turf. Organised retail can transform agriculture in India. The ICRIER study has documented that farmers get 60-70 per cent more for their produce when organised retail buys direct from them and they can bypass the mandis. That's another point that you've conveniently ignored.

Also, sometimes I wonder, is such blindsidedness accidental or is it deliberate? Afterall myth makers would always want to ignore stuff which destroy their stories.

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Re: FDI in Retail

Postby uddu » 20 Jan 2012 07:21

Amit, Co-op societies != Walmart or any retail firm.
Let me take the same example and give you a reality version of what must have happened if it's walmart selling milk in India.
They will look for the ones who can sell the cheapest milk. some farmers can sell it at some price then other at another price. So Walmart purchases them and because there is no other go. Suddenly one politician with 101 cows and 101 buffaloes and with a sense of humor tells Walmart that he can give melk in balk to the firm at much cheaper price than the others. Will they purchase from him by signing an agreement? Then what about others? Govinda Govinda.
Not able to supply cheaper milk than Walmart, they shut shop. Now who is the market leader? Who can now decide price of milk?
No one is against retail. The Indian retail sector do have some kind of good mechanism and has not gone to corporate farming etc like in the united states. They are getting products from the farmers and selling it here. Hope it stays that way.
About wastage, i'll not comment. Many do have expressed their views about lack of many things that lead to this situation.
I did post a rediff article about the difference b/w the two sectors. In motor vehicle production, the FDI is really good since it provides employment for the people of India, makes stuff in India and sells it in India. that's a welcome development and a great success as well. But there is no guarantee that the same can happen with retail. Already stuff is imported without any job creation in India. Just take the Single brand retail. Most of them are imported stuff.
Not necessarily from China. It can be from Bangladesh into WB and the NE states. It can be from Pakistan into western states, It can be from SL into TN and southern states. It can be from Myanmar.
Since mass production of anything, including agri products are going to be of great profit, import of such stuff at much cheaper price cannot be ruled out as such, even when the product made by an Indian farmer is rotting since he is unable to see the product at the price asked by the company (and if he does, then it will be for the last time).
To break a monopoly, you don't bring another monopoly. It's like saying its better to have Hitler over East India company. we don't need both and have to get rid of them. Regarding BJP supporting FDI, it was explained that such a proposal was brought in by someone in BJP and it was shot down by BJP itself.
The love for FDI in retail can be called the love for the Third Reich
We'll get rid of East India company but will invite Third Reich to rule over us. Hail Hitler. Oops Hail FDI in retail.
Last edited by uddu on 20 Jan 2012 07:30, edited 1 time in total.

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Re: FDI in Retail

Postby amit » 20 Jan 2012 07:25

hnair wrote:amit-saar, some thoughts. Your co-op to big-box retailer supply chain sounds promising. But my biggest worry is conformity that kills the diversity that makes India so cool.

eg: I like a certain type of mango that is not Alphonso, the current "standard mango". Currently, small farmers make sure I get that variety I love. Same for a specific chicken egg (bright orange yolk, that I am yet to see anywhere around the world). But with big-box retailers, they go by focus groups. The contract farmers (big and small) end up making one boring variety of mango because a few johnnies who were roped in for the focus group have no taste. The marketing will make sure even the majority who has taste, they fall in line. I mean how else can any one in US partake any drink sweetened with that insult to the taste buds called HFCS (not going into the health aspects of the syrup) ?

I mean, we dont have to do it that way because someone said "it is the best". Reason being Khanland's "progressive areas" are moving to Farmer's market formats and "less than 100 mile farms" to address these niche, but significant markets in a roundabout way (they couche it in "green" etc to market it to public). All the technological advances in production, inventory and distribution are still taken into account. Plus for a country like India, with not much refrigeration etc the less than 100 mile farm concept works rather nicely.


Hnair saab,

If you read my series of posts you'll see that I do not for a moment think that big box retail is a silver bullet that will solve all that ails Indian agriculture.

Personally the thing that concerns me the most is the 30 per cent waste we see every year in our agri sector. And even in the 21st century we have food inflation while there is a glut in production in one part of the country while there's scarcity in another part. I support organised retail - and the corollary to that, FDI in the sector - because I think that would help develop the supply chains that can stop wastage and ensure smooth distribution; only a big brand retailer would be willing to make the investments in refrigerated trucks, RFID, cold storages, route management, contact groups with farmers etc that go into a world class supply chain. The Govt neither has the money or expertise to make this investment.

Regarding your specific point about farmer's market format - another name for that is wet markets - I personally think that the Indian market is big enough for both types to survive. There will always be a sufficient number of folks who would prefer to buy from wet markets, that is their favourite saabzi wala rather than go to a big retailer. You know what? I have a Big Bazar outlet right next door to my home in Kolkata. However, when I'm there, I prefer to walk about a kilometer to a traditional market because I prefer to buy my veggies from my favourite saabzi wala, call it habit if you will but I love the bargaining that goes on - the guy knows I'll bargain so he starts with a higher price and the fun for me is to try and guess at which price he'll let go. :-) I relate this anecdote just to show that there will be a sufficient number of folks who will prefer this route to enable both formats to co-exist. And the studies that I've linked up , including the ICRIER study which has been acknowledged as the most definitive study of the Indian market till date, point to this happening.

So I think that niche markets will co-exist with big brand retail. The plus, plus will be wastage will be cut down to low single digit levels (a global standard) and farmers would get better pricing. Essentially we are talking about privatising agriculture and breaking the babu, politico nexus with rich wholesale traders who control the market.

Note: It's been well documented that the US situation is very peculiar to the country and perhaps Canada as well. As a result in various places the tactics which ensured that Walmart became the world largest company - I have no illusion that Walmart is benevolent retailer - does not work in other places. The point that I belabour on, Walmart International, has had mixed success, more so in Asia. So there's no reason to fear the company or its peers if they enter India.

JMT

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Re: FDI in Retail

Postby uddu » 20 Jan 2012 07:34

Farmers can get a better price if they can sell the products directly to the customers. There is such a mechanism in place in Kerala, where they are able to sell products directly to the customers or atleast to the end point. The farmer gets a good price. But i'm not sure about the customer. But the customer surely gets a fresh good quality product. So such a mechanism with good information and the make it easier for the farmer to take his product to the market will be good, rather than wait for some Walmart to reach them. No Walmart can succeed if the access to these parts are difficult, nor can the farmer.

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Re: FDI in Retail

Postby amit » 20 Jan 2012 07:36

uddu wrote:Amit, Co-op societies != Walmart or any retail firm.
Let me take the same example and give you a reality version of what must have happened if it's walmart selling milk in India.
They will look for the ones who can sell the cheapest milk. some farmers can sell it at some price then other at another price. So Walmart purchases them and because there is no other go. Suddenly one politician with 101 cows and 101 buffaloes and with a sense of humor tells Walmart that he can give melk in balk to the firm at much cheaper price than the others. Will they purchase from him by signing an agreement? Then what about others? Govinda Govinda.
Not able to supply cheaper milk than Walmart, they shut shop. Now who is the market leader? Who can now decide price of milk?
No one is against retail. The Indian retail sector do have some kind of good mechanism and has not gone to corporate farming etc like in the united states. They are getting products from the farmers and selling it here. Hope it stays that way.
About wastage, i'll not comment. Many do have expressed their views about lack of many things that lead to this situation.
I did post a rediff article about the difference b/w the two sectors. In motor vehicle production, the FDI is really good since it provides employment for the people of India, makes stuff in India and sells it in India. that's a welcome development and a great success as well. But there is no guarantee that the same can happen with retail. Already stuff is imported without any job creation in India. Just take the Single brand retail. Most of them are imported stuff.
Not necessarily from China. It can be from Bangladesh into WB and the NE states. It can be from Pakistan into western states, It can be from SL into TN and southern states. It can be from Myanmar.
Since mass production of anything, including agri products are going to be of great profit, import of such stuff at much cheaper price cannot be ruled out as such, even when the product made by an Indian farmer is rotting since he is unable to see the product at the price asked by the company (and if he does, then it will be for the last time).
To break a monopoly, you don't bring another monopoly. It's like saying its better to have Hitler over East India company. we don't need both and have to get rid of them. Regarding BJP supporting FDI, it was explained that such a proposal was brought in by someone in BJP and it was shot down by BJP itself.


Uddu Saab,

You present a different perspective from mine, and I respect it. Only time will say who's right.

I think you're point about stuff being imported from abroad, is very valid concern. That's why I think any legislation to allow FDI in retail must be very well crafted to ensure that a certain percentage of shelf space is reserved for Made in India stuff.

In fact this indiscriminate import is an issue by itself. Some time ago I had gone to a small gifts shop in Kolkata to buy a Ganesh idol to keep on the dashboard of my car. I found one that I really liked - made from some sort of hard plastic. Being curious about these things I asked the shop owner where it was made. He told be China! That got me pretty mad and I asked him why he was selling Ganesh idols made in China.?He told me that (in Kolkata at least) 70 per cent of the idols (be it Ganesh, Lakshmi, Saraswati, etc) were China made because they were almost 40 per cent cheaper than locally made idols.

Now this is problem in itself which I personally think needs to be tackled. Dumping by China is a very valid problem. Even traditional things like saris are being made in China and sold in India, imported by trader who are only interested in profit. It's no wonder the run the huge trade surplus.

However, the point is even if we stop organised retail from developing, the problem will remain. Again its a question of tackling both problems simultaneously.

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Re: FDI in Retail

Postby amit » 20 Jan 2012 07:40

uddu wrote:Farmers can get a better price if they can sell the products directly to the customers. There is such a mechanism in place in Kerala, where they are able to sell products directly to the customers or atleast to the end point. The farmer gets a good price. But i'm not sure about the customer. But the customer surely gets a fresh good quality product. So such a mechanism with good information and the make it easier for the farmer to take his product to the market will be good, rather than wait for some Walmart to reach them. No Walmart can succeed if the access to these parts are difficult, nor can the farmer.


Farmers selling direct to customers is the best case scenario. Customers can get the stuff for cheap while the farmer gets a good price. However, in most cases that's not practical and you can't have a situation where the customer can meet the farmer directly.

As a result we have the present situation where most of the differential between cost price given to farmers and the end price paid by customers are pocketed by middlemen who earn huge profits.

What organised retail can do is cut down the number of middlemen. In that way even if the customers pay the same price, the farmer would be given a better price - in fact the ICRIER study has documented that farmers get 60-70 per cent better price from organised retailers as opposed to selling the stuff to wholesalers at mandis.

This is the main reason I support organised retail and see FDI in the sector as the next logical step forward.

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Re: FDI in Retail

Postby uddu » 20 Jan 2012 07:45

Sirji, the question is should India go in for a big experiment. Here a lot of lives are at stake. The Ordinary farmer either succeeds or perishes. Already he is fighting so many odds from nature, cost of fertilizers, bribe, loans, controls, lack of information, lack of support from govt to politicians. But one thing is for sure. The political-corporate nexus will get stronger like anything else and you can see the politicos who are into business making a lot of money. That can be assured, be the farmer survives or dies.

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Re: FDI in Retail

Postby SBajwa » 20 Jan 2012 07:51

by uddu
Sirji, the question is should India go in for a big experiment.


Does India has any other option? In next 10-15 years the population is going to increase by 5% and then what?

65% of the people live in village and live off their inherited land while getting married and having kids. when these kids grow up! what will happen to that land? If father owns 5 acres of land and has 2 kids., 2 1/2 acres for each kid is not enough to sustain his/her family., they must venture out of their village onto other jobs (transportation, preservation, refrigeration, packaging, administration, management, marketing, etc).

If you want India to grow then all FDI into india must be accepted!!! (and invest 50% of that money into military/defense)

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Re: FDI in Retail

Postby amit » 20 Jan 2012 07:54

uddu wrote:Sirji, the question is should India go in for a big experiment.


I fail to understand why you call it a big experiment when we already have successful home grown retail chains and all over the world, even in countries less developed than India (for eg Vietnam) organised retail has been successful and the farmers have benefited?

Don't you think its strange that Vietnam exports more agri products than India does?

Anyway Uddu saab, it's obvious we both have different POVs. Since you present your views in a civilised manner I respect them. So let's agree to disagree on this. Time will prove whose POV is right. Organised retail will happen whether we want it or not, it's just makes too much sense. At the end of it we will have to see if it's been a net benefit or loss.

There's not much else we can do.

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Re: FDI in Retail

Postby uddu » 20 Jan 2012 08:06

You're correct when you say that the farmer will get a better price if he avoids the middle man. If FDI wallah is sourcing the product initially he'll provide a higher cost to the farmer. But what if the competition increases. The prices are going to come down and the profit margin is going to come down as well. Then it will reach a level where it's not possible to go down further. Here enters the bandicoots with huge land and capability to provide all the product requirement of the FDI retailer at much lower price. It's a big profit for him, since they are into corporate farming with latest technology in land that look like sea. From here onwards, there will be no farmer. But big bosses who'll control the market. This can happen within few months from the time of allowing FDI in retail. So even though in very short term the farmer will benefit, it's going to be loss for him in the long run. A loss for the same bandicoots for the short term, but a big profit making for them in the long run (The same ones who sit in between the farmer and customer, can switch business with FDI in retail and will make the farmer the laborer to produce the product and sell it directly to Walmart taking all profit. He is the new farmer, the corporate farmer). A better option is let the farmer directly sell the product in the market like co-op societies and let the farmer sell it directly to the customers. Let there be markets that sell stuff in each and every locality in the city and towns. May be small markets within the city in each and every locality where people can go and purchase directly from farmers. The farmers must be getting good information, where they can sell their products. Such mechanisms can avoid the middleman. Such a scheme seem to have been implemented by some IAS officer in some part of India. But why such things don't happen all over India? It's the same political administrative class who has no interest in the benefit of the Aam aadmi.

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Re: FDI in Retail

Postby kmkraoind » 25 Jan 2012 11:09

Is Ikea right to fret about local sourcing?

A mandatory 30 percent sourcing requirement from small Indian suppliers could upset that supply chain’s dynamics. “Anyone having even a very elementary understanding of this business dynamic would see the infeasibility for Apple, Ikea, Aldi, Uniqlo, H&M, M&S, or even Gap to meet the government’s condition on mandatory 30 percent sourcing from small-scale (and cottage industry) vendors,” she adds.

In addition, asking multinationals that operate on a global scale to depend on small Indian vendors requires not just splitting production across several suppliers, but also frequent changes in those suppliers. For instance, when a vendor, because of the growing number of orders, outgrows the definition of SMEs (enterprises with a total investment in plant and machinery of Rs 5 crore ($1 million)), it will have to be replaced by another one by the foreign retailer.

“With the same revenue, the company has to go to more suppliers so that they are less than $1 million. It will create huge supply chain problems,” Debashish Mukherjee, a partner and vice-president at consultancy firm AT Kearney told Reuters.

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Re: FDI in Retail

Postby member_21708 » 27 Jan 2012 23:34

Indian policy decisions are being taken in some foreign land even when the citizenry is against such moves

Suspension of FDI in retail a pause, India assures Walmart
Published: Friday, Jan 27, 2012, 22:41 IST
Place: Davos | Agency: PTI

India today assured global retail giants Walmart and Metro that its reforms agenda is well on course and the decision to put on hold FDI in multi-brand retail is "just a pause", forced by compulsions of coalition politics.

This assurance was given by India's Commerce and Industry Minister Anand Sharma when he met Walmart President Doug McMillon and Metro's board member Frans Muller on the sidelines of the World Economic Forum meeting here.

This is for the first time that senior management of the US and German retailers met any minister after Indian government suspended the controversial decision to open Foreign Direct Investment (FDI) in multi-brand retail on November 24.

http://www.dnaindia.com/money/report_su ... rt_1642787

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Re: FDI in Retail

Postby vishvak » 28 Jan 2012 20:20

Great Walmart of China & why FDI in retail will kill Indian jobs!
The desirability of foreign investment must never be questioned as long as it creates jobs, adds value and contributes to development. ... And these are just the factors that go against foreign direct investment in retail.

Study after study in developed and developing countries alike have shown that big box retail rather than creating jobs, destroy jobs.

In fact their utility in developed economies is due to the labour savings they achieve. This, combined with bulk buying and the recourse to monopsonic (the opposite of monopoly) practices, results in pushing down producer prices, undoubtedly with resultant benefits to the consumer.
...
On the other hand, the more of a commodity large retailers purchase in bulk, the lower the prices growers of agricultural commodities obtain! Studies by FAO and Oxfam attest to this

For instance, a decade ago coffee growers earned $10 billion from a global market of over $30 billion but now they receive less than $6 billion out of a global market $60 billion.

The cocoa farmers of Ghana now receive only 3.9 per cent of the price of a typical milk chocolate bar but the retail margin hovers around 34.1 per cent.

A banana farmer in South America gets 5 per cent of the retail price of the banana while 34 per cent accrues to distribution and retail.
...
The average size of a Walmart is about 100,000 sq ft and the average turnover of a store is about $53.2 million, each employing about 300 workers. The turnover per employee averages $175,000.

Walmart has a 9 per cent return on assets, a 21 per cent return on equity.. By contrast the average Indian retailer had an annual turnover of Rs 330,000. Only 4 per cent of the 12 million retail outlets were larger than 500 sq ft in size.

India has 53 towns each with a population over 1 million. If Walmart were to open an average Walmart store in each of these cities and they reached the average Walmart performance per store -- we are looking at a total turnover of over Rs 141,000 million with the employment merely of about 16,000 persons. Extrapolating this with the average trend in India, it would mean displacing about 758,000 persons.

Quite clearly Walmart is not going to create more jobs in India. On the contrary it will cause a massive loss of jobs in direct retail.
...
on the contrary farm realisations actually decline..
...
A recent joint study in Finland by Agrifood Research Finland and Pellervo Economic Research Institute reveals that for each kilo of rye bread purchased in 2010, for which the consumer paid 3.52 Euros, 1.24 went to the seller, while the grower received only 14 cents.

A further 1.74 Euros were shared by the milling company and logistics, while the rest went to the state as taxes. The study also revealed that while the trade got 19 per cent of the takings on food, it went up to 29 per cent in 2009.
...
Finally, the study showed that food prices rose faster than other consumer goods between 2000 and 2010.

Big business and MNC's like PepsiCo, Cargill, ConAgra and even ITC have been procuring food grains and farm produce for several years now and there is no evidence that general prices have increased.
...
The supply chain as it is now is mostly modernised and efficient, and what is yet to be modernised covers only a very small part of urban household consumption.

The argument then that we need the merchants of the western world like Walmart to modernise just 9.88 per cent of the supply chain is a bit bogus and self-serving.
...
More than anything else it is Walmart's Chinese connection that should cause us to worry.

While Walmart has 352 stores in 130 Chinese cities with a total turnover of $7.5 billion, Walmart directly buys via its procurement centres at Shenzhen and Dalian over $290 billion worth of goods from more than 20,000 Chinese suppliers, 70 per cent of its 2010 global turnover of $420 billion. (The Atlantic, December 2011 pp82).

With its huge monopsonic power, Walmart actually depresses wages, by forcing suppliers to cut costs.
...
The Chinese labourers, who make the shoes, box them and even affix the price tag, are the ones who get the worst deal. The International Herald Tribune says, "Yet for all the sweat that goes into making shoes in Tianjin, the factory payroll is equivalent to $1.30 a pair, 2.6 per cent of the US retail price."

Should the salary of every worker in the Chinese shoe factory be doubled, the retail price in the US would merely go up from $49.99 to $51 or so.

By keeping wages low without the protection of trade unions, China is in effect subsidising exports. What the flow of cheap Chinese goods through the Walmart direct pipeline from China into India will do to Indian companies, particularly the SMEs can well be imagined.
...
Even without Walmart, Indian SMEs are being driven out in sector after sector by cheap Chinese imports. For instance, there is no light fittings industry left in India. Same for toys.
...
As Nick Robbins wrote in the context of the East India Company: "By controlling both ends of the chain, the company could buy cheap and sell dear."

In this case it means profits for the Americans, jobs for the Chinese.

For note. Text formatting bold underline etc my own.

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Re: FDI in Retail

Postby kshirin » 15 Jul 2012 05:14

uddu wrote:Amit, the FDI in retail has nothing to do with Gora Vs Kala. It's not in India's interest to allow FDI in retail in the Present form. Even with 100 percent sourcing from India, I don't think any Walmart will source from ordinary farmer who makes 10 kg of Banana, das kilo of tomato. Never. So it's loss loss of the nation and win win for corporates and the one who is investing. it's jut the companies and the politicians who are into agri business. That's all. No one else will gain. We'll just be opening up another way to import while killing the Indian economy.


Precisely. The debate on FDI in retail has placed the cart before the horse. Unless we revive the manufacturing sector first, opening up retail to FDI will only aggravate the b.o.p. crisis which has led to the massive decline of the rupee, on which there is surprisingly no thread on Bharat Rakshak. As it is our malls are filled with single brand retail and our own retailers import a major proportion of their goods from outside. For Godssakes Homebase and Sugar and Spice don't contain even one Indian product. We could open upto FDI in retail if we had a strong domestic production sector and weren't importing simply everything of consequence, from oil, to aircraft, to telecom equipment, railways, domestic appliances, home computers, chocolates, cheeses, you name it. We have to focus on strenghtening the domestic manufacturing sector if necessary by attracting even more FDI there first. That's what China did. And that is why it opened up retail earlier than us, because it was confident it could supply its own needs. FDI already being massively present, it could supply branded products wihout incurring massive forex outflow. In fact the Chinese studied the implications on forex outflow before they opened up, adopting their famous step by step feel the stones under the river approach.

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Re: FDI in Retail

Postby Theo_Fidel » 15 Jul 2012 21:46

While Walmart has 352 stores in 130 Chinese cities with a total turnover of $7.5 billion, Walmart directly buys via its procurement centres at Shenzhen and Dalian over $290 billion worth of goods from more than 20,000 Chinese suppliers, 70 per cent of its 2010 global turnover of $420 billion. (The Atlantic, December 2011 pp82).


:eek: Holy cow! I knew it was bad that is simply breath taking. So much for the folks claiming Wal-Mart is in China. Wal-mart is simply an arm of the CPC now. Anyone want to take bets on domestic manufacturing now!

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Re: FDI in Retail

Postby member_20292 » 15 Jul 2012 23:22

which means that opening our economy to walmart is going to directly pay into the pockets of our competitors.

whats the alternative, though??

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Re: FDI in Retail

Postby SBajwa » 16 Jul 2012 00:19

The biggest advantage of Foreign investment is the standardization production of your product. i.e.

Why do we have 110 volts in USA/CAnada and 220 in other places? Standardization issues from long ago.
Why do we have some people driving on left others on right? same.
Why do you have different door/window sizes? same

If all products (agro, mechanical, furniture, clothing,etc) are standardized in a general area (better for globalized world so that you can easily export/import/plug) then the people will get wealthy.

FDI does provide some type of standardized production.

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Re: FDI in Retail

Postby Theo_Fidel » 16 Jul 2012 02:06

Bajwa saab how do you explain the fact that 98% of what Wal-mart produces in Panda is not bought by Chinese folks themselves!

IMHO the #1 advantage of FDI is the access to 0% cash from around the world and secondly any scraps of technology we can extract out of it. In the case of Wal-mart the negatives esp. WRT to Panda maal far outweigh the benefits.

BTW I don't buy the job loss argument. To my mind all those 3rd standard fails parked in local potti kaddai's and doing very poor business is not good for a countries economic well being. It is best we learn to become more productive. In and of itself Wal-mart is not going to make us more productive however. For productivity we need full reforms and investment in our countries infrastructure. Typically Wal-mart does not build or help install infrastructure. Usually it simply buys what it needs and puts unbearable pressure on local officials to divert resources to serve its needs. There was a horrible accident last year in this town near here where a 8 year old kid got run over while crossing the street. So journalists went digging and found that twice in the past 10 years money had been appropriated for a proper traffic signal system. Both times the local Wal-mart had demanded another traffic light and the money was promptly diverted towards its needs. The Journalists discovered that there were now 5 separate traffic lights around the two streets near the Wal-mart in order to slow the traffic down and force folks to buy more 'stuff'. Yet there was not one at the Elementary school side junction.

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Re: FDI in Retail

Postby member_20292 » 16 Jul 2012 11:44

^^^

On the other hand, theo fidel, having Walmart also means that we get cheap goods from China, at the low chinese prices that that country is able to manufacture them at, and having the Chinese government subsidize it with their tactics of wage suppression, high savings rate etc. So in one way it is highly beneficial for us to source from China anyways....let the Chinese govt subsidize our lifestyle, like it has subsidized the American lifestyle.

No?

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Re: FDI in Retail

Postby member_23626 » 16 Jul 2012 21:01

mahadevbhu wrote:^^^

On the other hand, theo fidel, having Walmart also means that we get cheap goods from China, at the low chinese prices that that country is able to manufacture them at, and having the Chinese government subsidize it with their tactics of wage suppression, high savings rate etc. So in one way it is highly beneficial for us to source from China anyways....let the Chinese govt subsidize our lifestyle, like it has subsidized the American lifestyle.

No?


Nice joke, althoug it's offtopic and idiotic IMVHO

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Re: FDI in Retail

Postby Theo_Fidel » 16 Jul 2012 23:43

mahadev,

There nothing wrong with that logic if Panda will supply us goods for Rupees. I would very much support it then.

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Re: FDI in Retail

Postby vishvak » 17 Jul 2012 15:49

Theo_Fidel wrote:mahadev,

There nothing wrong with that logic if Panda will supply us goods for Rupees. I would very much support it then.

Our learned UPA ministers however are unaware of following:

If Chinese trade with dollar accounts, then dollars will be spent. Not Rupees. Dollar is a distinct international currency with pulls and manipulations of its own.

Some links
Currency manipulation: US accuses China again

Chinese accuse USA of manipulation
Think Twice Before Accusing Others Of Currency Manipulation

Brazil accused both China and USA of currency manipulation
Brazil Warns Trade War Looming - currency manipulation turning into trade wars

But still dollar accounts are used to buy Chinese goods as dollar is the most common international currency standard.

The meaning of even more dollars going to china would mean that Indians will have to either export more raw materials/products to balance dollar trade accounts or do their bidding even more thereby even worse balance for longer term.

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Re: FDI in Retail

Postby member_20292 » 17 Jul 2012 17:23

Theo_Fidel wrote:mahadev,

There nothing wrong with that logic if Panda will supply us goods for Rupees. I would very much support it then.


qn1. Why why ?

qn 2. The US owes China a lot of money. Why cant we also buy a lot of Chinese manufactured goods on credit, like the US has done, is my question??

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Re: FDI in Retail

Postby chetak » 17 Jul 2012 18:45

The gungadin brigade led by godrej is still going strong.

Follow Obama order on FDI, reforms: CII

The government should announce confidence building reforms (CBRs) such as allowing FDI in multi-brand retail to address concerns expressed by US President Barack Obama on India's investment climate, industry body CII said today.

"It is time to announce a few confidence building reform measures such as increasing FDI (foreign direct investment) in defence production... opening of FDI for multi-brand retail," CII President Adi Godrej said in a statement.

These steps would go a long way in improving perception about India globally, he said.

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Re: FDI in Retail

Postby member_23626 » 17 Jul 2012 19:05

mahadevbhu wrote:
Theo_Fidel wrote:mahadev,

There nothing wrong with that logic if Panda will supply us goods for Rupees. I would very much support it then.


qn1. Why why ?

qn 2. The US owes China a lot of money. Why cant we also buy a lot of Chinese manufactured goods on credit, like the US has done, is my question??


qn1. you are sounding like a troll now, please leave this childish gibberish and get back on topic
qn.2 Umm, it's actually the other way around, China has lent some 1.2 trilion dollars to US though their chinese junk. No wonder US has got it's undies in a twist, notice how the media suddenly started giving a lot more attention to chipandas from about 2008-2009 time period. That's precisely the time when the yamreeks realized how much they rely on made in china for their economy. That's more or less what can happen in India. Theoji's solution makes sense but it won't happen. We don't have the capacity to manufacture in bulks, neither can we provide cheap labour (notice that both of them are a must if we want to consume our goods and not chinese junk). Do you seriously think walmart will uproot a well settled manufacturing base from china just because someone wants it to?? Until we make these changes, it's better to touch FDI with a foot long pole... We have made it to trillion mark without it, I guess we can go on for some more years. I also think that FDI will connect us to global economy, and as you know, we are living in turbulent times, I know we should be optimistic but I think a realistic approach is a better one.. US is in deep $hit, so is EU, do you seriously want to rely on these idiots for your economy?? We are not a communist nation so even the wet dream of manipulating economy is just an utter waste....

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Re: FDI in Retail

Postby member_23626 » 17 Jul 2012 19:09

chetak wrote:The gungadin brigade led by godrej is still going strong.

Follow Obama order on FDI, reforms: CII

The government should announce confidence building reforms (CBRs) such as allowing FDI in multi-brand retail to address concerns expressed by US President Barack Obama on India's investment climate, industry body CII said today.

"It is time to announce a few confidence building reform measures such as increasing FDI (foreign direct investment) in defence production... opening of FDI for multi-brand retail," CII President Adi Godrej said in a statement.

These steps would go a long way in improving perception about India globally, he said.

follow Obama and just like his country put your own country in doldrums, borrow mone from every other country out there and then moan about "change" for the foreseeable future.... bloody a$$lickers

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Re: FDI in Retail

Postby chetak » 17 Jul 2012 19:16

Sridhar.E wrote:{quote="chetak"}The gungadin brigade led by godrej is still going strong.

Follow Obama order on FDI, reforms: CII

The government should announce confidence building reforms (CBRs) such as allowing FDI in multi-brand retail to address concerns expressed by US President Barack Obama on India's investment climate, industry body CII said today.

"It is time to announce a few confidence building reform measures such as increasing FDI (foreign direct investment) in defence production... opening of FDI for multi-brand retail," CII President Adi Godrej said in a statement.

These steps would go a long way in improving perception about India globally, he said. {/quote}

follow Obama and just like his country put your own country in doldrums, borrow mone from every other country out there and then moan about "change" for the foreseeable future.... bloody a$$lickers


godrej has been particularly irritating about resuming ties with pakistan. Were not any of his friends shot at the Taj??

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Re: FDI in Retail

Postby member_23626 » 17 Jul 2012 19:21

chetak wrote:godrej has been particularly irritating about resuming ties with pakistan. Were not any of his friends shot at the Taj??

These jokers are sold outs of highest order, no wonder these are some of those hi-fi english speaking jingoes who feel proud to lick a$$ses of their masters... They don't give a damn about the country they grew up in... they think they have done a great favour to India by putting their companies there.....

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Re: FDI in Retail

Postby vishvak » 17 Jul 2012 20:14

Politics going on after remarks from the POTUS
Govt hits back at Obama, Opp. says ‘irresponsible’
However there is lack of of clear opposition to FDI.

CPM targets Obama for FDI remarks
Why does CPI oppose FDI when Chinese would benefit too or is it just a show and pomp before being silent when it matters so that things would look normal.

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Re: FDI in Retail

Postby kshirin » 17 Jul 2012 22:56

I totally agree with Sridhar, having seen some pretty crummy countries abroad I think that we Indians have it in us to truly surprise ourselves. However I feel with the right encouragement we can grow manufacturing in our country. And I wish there had been an option in the poll for greater percentage of outsourcing from India itself for all retailers, Home Base and other Indian retailers etc. after all import everything from abroad. I wouldn't have a problem with retail if it had a 70-80% local procurement condition. And why shouldn't we? Doesn't America have a Buy America provision which flouts its WTO obligations?

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Re: FDI in Retail

Postby Haresh » 19 Jul 2012 14:44

A interesting story on how big supermarkets in the west treat farmers.

Dairy farmers are being skimmed alive

http://www.telegraph.co.uk/earth/agricu ... alive.html

and they wonder why India and other countries are apprehensive about letting large western supermarkets have a free hand.

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Re: FDI in Retail

Postby JwalaMukhi » 04 Aug 2012 10:05

Walmart supplies roughly 1/4 the food needs of US. That's a scary prospect, considering, walmart carries lot of processed junk food. The ratio of fresh food to junk food is very small. Lot of other countries spend more money on food and less on health care. US spends more money on health care and less on food.

Primarily because, the junk processed food is staple. Superstores are enticing only for the fact that they cater to junk processed cheap food that have considerably longer shelf life than any fresh food with whatever RAC (refrigeration and A/C) they might deploy. Fresh food from farmer's market is less than 1% in the US. Most food needs are met through supercenter chain stores. Where the impetus is towards junk processed stuff for obvious reasons. Cheap food, cheap goods are enticing and people pay later for costly health care and costly remedies due to usage of cheap stuff. Keep people poor, so they can be hooked and afford only the cheap goods that these supercenters peddle.

Walmart and other supercenter brings in a culture shift of easy (presumably unhealthy) and gross lifestyle. One has to pay the piper one way or the other. Is poverty a friend of walmart? The answer to that question will help know the ramifications of FDI. FDI is a mixed baggage and if not handled well, can and will impoverish citizenry. It could turn out to be the proverbial jumping from boiling pot to a frying pan, if not done correctly.

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Re: FDI in Retail

Postby Fidel Guevara » 18 Aug 2012 02:56

I voted for (3), with the 30% India-sourced condition. However, Wal Mart is notorious for playing with such rules. They will stock bulk groceries (obviously made in India) and reach the 30% threshold. The real value-added products will then be open to import from China.

It could be category specific - down to the level of "DVD player...25%", "Camera...35%", "CFL Light bulbs...80%". Though then the bureaucracy of auditing this becomes much larger.

Somewhere in between is the sweet spot.

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Re: FDI in Retail

Postby chetak » 18 Aug 2012 11:55

amit wrote:I'm sorry but you've been taken in by very subtle propaganda. Ashok Malik captured the essence of this propaganda and who are behind it very nicely in his article. The "poor kiranas" are just a bogey to hide the real guys who are worried.


amit ji,

Could you please provide a link to Ashok Malik's article. Thanks.


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