Government of India is in a hurry to open Retail business to foreign direct investment.The retailers in India are scared that the large Corporates from outside indi will gobble them up.Political parties are by and large with the traders who form a sizible vote bank.Central goverment is aiming at getting in $ and thereby controlling the slide of Rupee against Us$.There is also a hopes that this will be a tonic for stock markets with foreign players again taking active interest in investing in Indian stocks.
Now,let us examine pros and cons of foreign corporates entering the retail sector.Fom a consumer point of view,the advantages would be that he gets better shopping enviornment,hopefully better prices, and larger variety.The disadvantage would be that of lack of flexibility,loosing out on the "friendly neighbour shopkeeper"etc.
The hue and cry against FDI in retail comes from the traders who are in business now. They genuinly apprehend that their clintale and therby business will deminish with the coming of multinationals into their field of activity.They have seen many Indian brands getting wiped out or marginalised with the entry og multinational compatition.
One real issue is that of stocking of large quantum of commodities by the new entrants.With their money power,the MNCs will lift massive quantum of stocks,making the commodity market short in availability.By law of demand and supply,this will result in prices going up in the open market.MNCs with their ability to buy large quantum at harvest time can get commodities at bargain prices.The open market with less of stock availability will be forced to pay higher prices.This will push up the prices at the same time give price advantage to MNCs.
But even then,the present traders have little cause to worry.They have to prepare themselves to face compatition from MNCs.Their advantages are location,existing goodwill,low operating costs,and better understanding of local market conditions.They can refurberish their shops to give better shopping experience to their customers.Flexibility is onething they can score over MNCs.Rather than trying to block the entry of MNCs,(which anyway will be futile),they should address themselves as to how they can counter compatition.Even in the west and middle east,smaller traders are able to effectively counter compatition from the biggies.There is no reason why this model cannot work in India too.
Now,let us examine pros and cons of foreign corporates entering the retail sector.Fom a consumer point of view,the advantages would be that he gets better shopping enviornment,hopefully better prices, and larger variety.The disadvantage would be that of lack of flexibility,loosing out on the "friendly neighbour shopkeeper"etc.
The hue and cry against FDI in retail comes from the traders who are in business now. They genuinly apprehend that their clintale and therby business will deminish with the coming of multinationals into their field of activity.They have seen many Indian brands getting wiped out or marginalised with the entry og multinational compatition.
One real issue is that of stocking of large quantum of commodities by the new entrants.With their money power,the MNCs will lift massive quantum of stocks,making the commodity market short in availability.By law of demand and supply,this will result in prices going up in the open market.MNCs with their ability to buy large quantum at harvest time can get commodities at bargain prices.The open market with less of stock availability will be forced to pay higher prices.This will push up the prices at the same time give price advantage to MNCs.
But even then,the present traders have little cause to worry.They have to prepare themselves to face compatition from MNCs.Their advantages are location,existing goodwill,low operating costs,and better understanding of local market conditions.They can refurberish their shops to give better shopping experience to their customers.Flexibility is onething they can score over MNCs.Rather than trying to block the entry of MNCs,(which anyway will be futile),they should address themselves as to how they can counter compatition.Even in the west and middle east,smaller traders are able to effectively counter compatition from the biggies.There is no reason why this model cannot work in India too.
