India traditionally fears adoption of new technology or concept. For instance when computers were allowed to enter India, all feared it is going to take away many jobs. We waited for so long before adopting it. Hence, the world took leaps during that time, while India struggled to maintain a healthy growth rate. E-commerce in India came after it a whopping 10 years or so after the launch of Amazon. And thanks to Cash On Delivery service our E-commerce is now generating high value of GMV. The wait and slow adoption is just slowing down the growth of India. To what it should-be if we had adopted these technologies and concept in their initial stages. Things are changing with the Startup ecosystem in the country, likes of Ola and other new unique concepts have been established here just after their launch in USA . Also favourable FDI policy for startups.
Protectionist “FDI Policy”
One industry which is at a very big loss right now due the “So called protectionism policy” is the Retails Industry. Likes of Walmart, Metro and many other big retail brands are not being allowed to enter India in retail space because of the FDI policies. Though they’re started entering our country through the Cash n Carry model. But, these stalwarts of retails need to be given freedom and FDI norms should be favourable for them which will eventually benefit our country. I’ll state my reasons below on why I feel the FDI policy needs to be relaxed soon.
The reason stated by the government for such tough norms is they fear ” Small shops will lose their business”. That is absolutely an absurd logic. While names like Big Bazaar, Reliance Fresh and many others are doing the same business, following the same model are allowed to open up such retail stores. I will just like to ask you have you seen any local shop near your locality closing after these giants opened up? I haven’t seen any shops being closed, in fact local shops have started to look better and offer better service because of these giants. Even the entry of E-commerce hasn’t let to such drastic steps in local shops. That is because they know they’re now competing with these giants hence they need to be competitive. That is why healthy competition is always good for the consumer.
The Real Reason
In my opinion the real reason why FDI Policy in multi-brand retail is so tough is because of the lobbying practices by these companies. These companies know that if Stalwarts like Walmart and Metro enter India their business will be in trouble. Hence, to avoid tough competition lobbying is done.
Why We are Losing ?
Lets be very clear, Walmart is a Pioneer in Multi-Brand Retail. It is the first to give importance to live tracking through GPS. Walmart and such foreign players if allowed to enter in retail is going to generate huge employment. Not, only to cater their own stores but also to the many connected with them. Manpower will be required for logistics, backend management, software development and many more. Also the places from where they plan to procure in India will also employ more workforce as the orders will be in millions of products. India desperately needs to create millions of jobs as there is huge disguised unemployment specially in rural India.
If these giants enter India, the Industry is going to benefit in terms that we can learn so many things from them. There is a huge gap between the way Walmart functions and a Big Bazaar functions, that is because Walmart is serving in so many countries. It has been there for more than 50 years, it is constantly evolving and developing new ways of SCM and procurement techniques. Indians and Indian companies can learn so much from them. Also, this will directly make the vendors to follow strict safety and quality norms as these companies make sure that the products are of high standards. Moreover they also make sure the well-being of the vendors labour and workforce.
Consumers too Are Losing out
We as consumers are suffering in terms that there is still a lot of scope for price cut. Just because the Indian companies don’t have such resources of better procurement, Indian consumers are somewhat paying more. More than what they would’ve if Walmart and others were present. Even the facilities would’ve been way better.
The government must realise, that easing these norms after 10 years is not going to solve the purpose. These companies follow a strict corporate strategy. They want to enter India now, because they realise it is the best time to do so. Maybe, after 10 years they might not want to even if we allow them. The Make in India can benefit from them entering India. We missed the manufacturing bus and are now trying to makeup for that, we might but definitely not to the extent that China did. Yesterday there were news of Mrs. Harsimrat Kaur (Union Cabinet Minister of Food Processing in the Government of India) is willing to ease FDI policy. Lets hope the government understands the importance of these companies soon. As they can really help India sustain growth.
Also to add up, 92% of the Indian Retail is unorganised, compared to that of US who have 85% organised retail. We actually don’t need so many retail shops, these same will be hired by the foreign multi brand retail company. Paid equivalent, and more importantly will get different benefits, no exploitation of labor. More people will come under the system which is eventually going to contribute to GDP and higher tax collection.