Call: 011 26961841, 26862826, E-mail : info@bracecorp.net
sourcing hardware

You are here

Home

Retail-FDI

Demanding a Full Stop

The country’s traders are getting vocal against the prospect of foreign investment in multi-brand retail

Although the idea to open up foreign direct investment (FDI) in multi-brand retail has been mooted for quite some time, perhaps never before has it faced a stiffer opposition from the trade fraternity. Last year, when the government had released a discussion paper on this matter, the Confederation of All India Traders (CAIT) had vehemently expressed its dissent by saying that the move would wipe out indigenous shopkeepers. Now, with the Committee of Secretaries (CoS) proposing to the law makers that there is merit in allowing up to 51% foreign investment, CAIT’s ire has reached a new high.

The CoS Proposal

  • Any foreign retailer desirous of an Indian entry must be ready to invest $100 million (around Rs. 450 crore)
  • At least 50% of the investment should be in back-end infrastructure
  • The retailer would have to source at least 30% of the manufactured items from small & medium enterprises
  • State governments will play a crucial role in allowing or denying entry to a foreign retailer
  • Only cities with a population of10 lakh or above might be considered initially
     

Praveen Khandelwal (praveendel@gmail.com), CAIT’s general secretary who has been spearheading the movement against foreign investment, exclaims, “We are not at all in favour of foreign investment in multi-brand retail, as it will not only adversely affect the economy and trade, but will also directly hit more than 30 crore people earning their livelihood from retail trade in the country. There are already a handful of large Indian departmental stores which are proving to be a thorn in the flesh of small traders and shopkeepers. The arrival of foreign players will add to the woes.”

Notably, the Department of Industrial Policy & Promotion (DIPP) had released a discussion paper on the subject last year, which received about 180 responses. Khandelwal asserts that 120 of those responses strongly opposed FDI, and the rest in support were mainly from global retailers and other vested interests.

“While going through the recommendations, one gets a feeling that they are doctored and drafted to suit a particular lot. What strengthens this argument is the fact that foreign retailers are spending huge amounts on lobbying in India. For instance, US-based Walmart has reportedly shelled out an enormous `52 crore for this purpose.” And Khandelwal warns that the Confederation will not take things lying down, it has drawn out a well orchestrated plan for showing dissent.

Over the past two months, CAIT along with hordes of traders has staged countrywide protests demanding a full stop on foreign investment in multi-brand retail. The first phase of the agitation was initiated at Delhi’s Chawri Bazaar this July, a wave that later spread across various parts of the country. And the strong sentiments have been aptly echoed in slogans like hum samaan bechte hain, sammaan nahin (we sell goods, not our self respect), and retail vyapaar main FDI desh ko berozgar karega (FDI in retail will increase unemployment).

Well, giving a green signal to foreign investment in retail has always been a contentious issue and has invited mixed feelings. While corporates may have vouched for it, the majority of the trade fraternity has unequivocally opposed it time and again. Apart from citing ‘resultant unemployment’ as a reason, traders opine that giant retail chains are allowed various facilities by the government like tax benefits and relaxation in duties. “This is definitely not the case with a small shopkeeper who has to toil hard for survival,” quips Khandelwal.

Nonetheless, one cannot ignore the positive side of foreign investment. Retail giants like Walmart (US), Carrefour (France), and Tesco (UK) are known for their exemplary business practices in areas like inventory management, warehousing, logistics, technology, customer relations and after sales support. Besides, the arrival of these global retailers will bring in more employment opportunities for the country’s educated youth.
Modernity in retail is undoubtedly the need of the hour and perhaps this is the reason why the government is considering FDI. CAIT, however, acknowledges this reality but is of the view that instead of bringing in foreign players, it’s much wiser to modernise the domestic traders. No wonder it is demanding a national policy for planned development and modernisation of retail trade in India. Its other recommendations include a Small Retailers Act for the benefit of both the shopkeeper and consumer.

IN FIRST PERSON

CAIT general secretary Praveen Khandelwal demolishes with ease the proposal for allowing foreign investment in multi-brand retail.

CAIT’s stance against FDI is being equated with the Anna Hazare Movement. Does this imply that allowing foreign investment in retail is tantamount to corruption?
Well, a democracy is by the people and for the people. By considering FDI in retail, the government is turning a blind eye to the welfare of the country’s innumerable traders and shopkeepers who burn the midnight oil to survive. In my opinion, this is an offshoot of corruption. Talking of the Anna Movement, it’s a befittingexponent of people power and an inspiration for all of us.

Various trade associations across the country are planning to stage protests in front of large retail stores and corporate houses. Will this help to prioritise political will in your favour?
It’s not a question of my personal interest, we are fighting for a national cause. The trade fraternity has made its stand clear to the government time and again. But it’s also important to tell the international retailers that they are unwanted here. And we are hopeful that our endeavours will succeed.
 
Won’t the arrival of foreign retail chains create employment opportunities?
Look at those who are currently employed with large departmental stores. It’s a deplorable state of affairs. Retail outlets hire young interns who are made to work for more than twelve hours a day for petty salaries. Cases of inhumanity towards employees have been registered against Walmart. And recently, some interns at Metro Cash & Carry Bangalore complained of health problems due to a rigorous work schedule.

Aren’t you being alarmist by saying that the Walmarts and Carrefours will completely kill the business of small shopkeepers?
Small shopkeepers have a limited display area at their disposal whereas a Walmart outlet, for example, is spread across acres. Besides, at a large retail store one can find everything from a pin to a complete home improvement system and that too at various price points. And considering the modern day consumer mindset, the brand allure is inevitable. It’s the shopkeeper who’ll suffer the most.

So it boils down to pricing?
This is a fact that few would want to challenge. Whenever a multi-national retailer enters a new country, it eliminates competition by adopting predatory pricing. It can afford to initially sell at lower prices in order to kill competition from small shopkeepers. And this means that a local trader, who’s already burdened with a cumbersome tax structure, will have to eventually shut down business.
 

 

Interestingly, the trade body recently conducted a survey across 28 cities to gauge whether the Indian trader is willing to evolve with time or not. The results are quite encouraging. Out of the 9861 shopkeepers who responded, 7099 (72%) were inclined to upgrade their existing business structure whereas 1676 (17%) were satisfied with the existing business set up. The rest chose not to comment.

“Small shopkeepers are in favour of a modern format of retailing but simultaneously expect support from the government. This includes financial assistance in the form of lower lending rates by financial institutions, and a simplification of the tax structure,” he asserts. Meanwhile, CAIT is planning to toughen its stance on the matter and has urged the Centre to draft a white paper on the pros and cons of FDI and reason out its necessity in India. 

 

Site Maintained & Designed By MantraIT