With a potential market size of USD 450 Billion, India – one of the largest developing nations, brought a new reform defying the falling growth rate over the past years with allowing foreign retailers to hold up-to 51% equity in Multi-Brand Retail operations in Indian sub-continent. The policy which was earlier rolled back in December 2011, has today brought a sense of great business opportunity for the foreign retailers with a view of opening large hypermarkets across the country, however acceptance to state governments and the people of India brings with it multi-fold advantages which are as follows:
- A new ray of hope
India has certainly sent some positive signals to foreign investors with opening one of its largest industries to foreign investment. This would in some sense change how investors view India as an investment opportunity.
- Inflow of Foreign Capital, Technology and Business acumen
Retail which is a USD 450 Billion sector, brings with it large amount of foreign capital and technology, and business acumen of foreign retailers including Wal-Mart, Carrefour, Tesco etc.
- Development of Infrastructure, Logistics and warehousing industry
The retailers enter with a view not to open just another Kirana shop but with a view to open hypermarkets which require a lot of investment in terms of infrastructure development, warehousing and supply chain management and logistics development.
- More taxes to Indian Government
Presently the buying and selling by Kirana shops doesn’t entail paying taxes to the government as much of it is not accounted for, however the buying and selling with the organized players including existing Indian retailers would entail paying requisite taxes to the Indian government which would help increase government revenues, decrease fiscal deficit and organize the Industry which otherwise is around 92% unorganized.
- Creation of employment
As, the retailers set up their hypermarkets in India, it would help in creation of thousands of new jobs which otherwise would not have been possible as a single store would employ over a hundreds of workforce.
- Farmers gets more margins & Fall in inflation
This also provides, farmers an opportunity to gain higher margins on their produce which is otherwise not possible due to the chains of middlemen which buy at a very cheap price and sell the same at hefty margins to the mandis. The elimination of middle man would not only help reduce the price of essential but all the commodities that would help reduce inflation.
However, with no sense of understanding and only looking for votes, the majority of the political parties across the country have been criticizing the reform as passed by Indian government with only a single point agenda that they are trying to save the employment of mom and pop stores i.e. the Indian Kirana stores.
However with utter brilliance, they fail to realize that the country which already has a significant no. of existing domestic entities in multi brand retail has not out thrown the local Kirana stores. For a fact that they are missing is that, the Foreign retailers would not be setting up their stores in every corner of the street like the Indian Kirana store but it would be in shopping complexes, malls, or places which has the capacity to accommodate large hypermarket stores. Thus even in case you have to buy a packet of bread or 500 gms sugar, a person would buy from local Kirana shops and not run to these hypermarkets.
And hence, it looks more as a proposition of political fallacy rather than a united wish to change the plight of the country.
Related Article: Government Permits 100% FDI In Single Brand Retail