FDI IN WHAT?

Okay, there has been enough spoken, written and debated in the past few days on the Foreign Direct Investment (FDI).

This raging debate has been in the FDI in retail sector, which the supporters have somehow converted it into a FDI in ALL sector debate, which it is not.

The opposition has been limited to the investment coming in the Retail Marketing Sector only according to me.

For a layman like me, the retail sector’s definition is that group of commodities that are needed on a day to day basis, recurrently. These could be food, clothing, toiletry and other such items, which we buy in traditional stores. Most of which are niche shops catering to a related group of products.

Today we have enough stores catering to these day to day needs. We also have multi brand and multi unbranded stuff available in each of the segments, including food items.

In fact today we have the luxury of buying fruits from Australia to South America with our local fruit vendor.

Having said this, let us understand what the limitations that are highlighted.

·         Wastage down the line, especially of food items (Perishable goods)

·         The middle man raking in profits, taking both the producer (farmers) and the consumer for a ride.

As we know, the movement goods for example in the agriculture happens something like this:-

Farmer         Sub dealer        Wholesaler         Retailer         Consumer          

Where would they build the storage facilities? Where would the land come from? 

Assuming they will bring in those large cold storage Trucks we see abroad, which roads will they ply them on?

Who will guarantee them uninterrupted power supply to run these storage facilities

  What guarantees are there that the profits will be passed on to the supposed beneficiaries? Who will monitor?

 Who takes the guarantee that whatever they sell will be bought from the Indian farmers /manufacturers?

 Government Ministries like Food & Agriculture, Roads, Railways, Power, etc… and their roles played remain the biggest hindrance to date in all the development. This inefficiency to say the least is what the Government is trying to hive off, washing it’s hand off from its responsibilities.

The activities of this whole chain as we know, happens largely in an unorganized sector.

Essentially the argument is that the combined role of the 3 marked red, now popularly termed as ‘middle men’, commonly known to us as “traders” are the reason for all the woes that are faced by the Farmer & Consumer.

Hence remove these ‘middle men’ with the Foreign Companies with their Direct Investment in this sector.

This is to be done with the assumption that :

1.   They will Directly Invest in building modern storage facilities, transport facilities etc… to reduce / remove wastages and make the system more efficient.

2.   The removal of profit margins of the ‘middle men’ will in turn benefit the farmers & the consumer as the companies are “expected” to pass on these profits to them.

This sounds fine, till the following few questions remain unanswered.

Many more questions would come to your minds as well.

Quite a few business enterprises have entered this sector of retail with good results. Many of them like Bharati (50:50 with Wal-Mart), already have Foreign companies as their partners. What infrastructures have they built?

If they have not done it with 50% equity & want to make it 51%, What assurance can the government give that adding another percentile will do that?

The percentile will only give the foreign companies to monopolize the trade and hive of profits to their respective countries.