1. FDI in Retail There is whole lot of mayhem about FDI in retail ever sinceit knocked the doors of Indian Economy. The mere wordFDI has haunted the corridors of parliament, big retailoutlets, mom n pop store owners, the middle men and eventhe end consumers. The arguments citing the advantagesof FDI in retail mostly revolve around the following:Improvement in Retail capability building Improvement in management of supply chain Push to productivity With the recent development in this context, it is essentialto analyse the impact of FDI in retail without any bias. Tocut the long story short:

2. FDI in Retail What is FDI in Retail? Single Brand Retail: FDI investment till now was 0.03 % (INR 204 Cr) of total FDIinvestment from April 2000 to September 2011. This relaxation will increase FDI inretail sector through the entrance of new players (Foreign or Domestic), increase orbuy outs in stake, M&A amongst existing single brand retailers, Joint ventures withforeign and existing players. There will be sourcing norm of only 30% from local sources. This will lead to lowerprocurement locally. So MSME sector will lose but the luxury retail market willwitness growth. This will surely lead to outflow of money from India. Growth inluxury retail market and low or no growth in MSME sector will lead to negligibleemployment generation.Possibly, there will be changes in existing licensing/ distributor/ franchisearrangements being converted into joint ventures or complete buy out by foreignentrants. 3. FDI in Retail Multi brand Retail: FDI here will lead to increasedinvestments and growth in Indian retail sector. In this casetoo, new JVs and M&A will be seen. Tactics of buyingstakes or complete buyout will be played. This shouldprovide options for existing Indian retail companies to raiselong term capital for expansion. This financial inflow will lead to development of retailinfrastructure and value addition to the existing supplychain. The sector will see investment in setting up supplychain mechanism, transport infrastructure, cold storage,technology etc. This will directly enhance the operationalefficiency of the entire supply chain. 4. FDI in Retail Agriculture: The farmers/producers will be benefitted as theywill get better price for their produce. Although the buy will becompletely based on bulk buy i.e. entire stock based on quality.This means if the company decides to purchase only the qualityproduce then the not so good produce will find its way to localmarket (if it exists) or in garbage. Either way thefarmer/producer will get paid for the quality produce. This inturn will encourage farmers/producer to improve their existingways of farming/production. Again this will require investmentin technology.Companies may go for contract farming and this again will leadto improvement in the method of farming by introduction ofbetter seeds, better fertilizers, new farming equipment etc.provided by the companies. 5. FDI in Retail FDI in retail to benefit the farmers &consumers Middlemen: Another very visible impact will be the eradication ofmiddlemen from the supply chain. It is usually believed that this wouldlead to lesser exploitation of the farmers/ producers and at the sametime competitive process for the end consumers. But at the same time,the big retail brings in new breed of middlemen- quality controller,standardiser, certification agency, processor, packaging consultants etc.It is these middlemen who would now take their share from thefarmers profits and the consumers savings. Thus, it is premature to comment on how much the farmers and endconsumers will gain out of this elimination of traditional middlemenand introduction of the new middlemen. 6. FDI in Retail Employment: the Indian retail market is estimated to be around $ 400billion with more than 12 million retailers employing 40 millionpeople. A contrasting picture will be seen as the small retailers, Kiranashops, departmental stores etc. will find a tough time to compete oreven exist in such scenario. In such scenario, the landless farmers orlabours that turned into small time retailers will be worst hit.Government will have to face the question of how to compensate fortheir loss. This problem will further get intense considering the verylow employability of such landless farmers/laborers.Another viewpoint is that the damage will not be so extensive as the bigretailers will operate in the outskirts or in a very few locations in anycity or town and the Kirana shops will co-exist in the interiors. In anyof the cases, the sheer magnitude of impact to society will beintolerable. 7. FDI in Retail 8. FDI in Retail 9. FDI in Retail 10. FDI in Retail What Retailers Think Role of State government: As clarified by the central government, it will beon the state governments whether or not to allow multi-brand FDI in therespective state. But India, being a signatory to Bilateral Investment promotionand Protection Agreements (BIPAs), has to provide national treatment to theforeign investors. The fact that such agreements have been signed with morethan 70 countries will certainly force the state governments to open up for bigretailers. It will be interesting to see the regulation norms set by the state governmentsas it will clearly guide the extent of FDI in their respective states. One thing isfor sure that State government will be able to get more revenues by keeping FDIin place. But how that increased revenue will justify the lost livelihood ofmillions of people or what steps will the government take to minimize this loss.