FDI in multi brand retail

FDI   IN  MULTI  BRAND  RETAIL

 A positive step towards the development of Indian Economy

As long awaited economic reforms being announce by the Govt., although it is late but certainly this positive step will drive & excel rate our economy.   If FDI or foreign Retail Stores comes to India, all sectors, manufacturing / agriculture & services will improve. 

a.    More employment

b.    Growth for small & medium manufacturers

c.    Real estate sector will zoom

d.    Price Hike of food stuff can be stopped.

e.    Attractive price for farmers for their products.

Infrastructure & Real estate:    If Wall-mart, Tesco, Carefur & other Retail store comes to India, than they need first, space to start their stores, either on rent lease or purchase, through out the county.  So property agents, building owners all will be benefited.  If we assume that 4000 crore rupee may be spend on building purchase, logistics, back office storage & other infrastructure  than this all amount will go into the pocket of our “Hindustani bhai”.  After building, lot more things are still require to start a big retail stores.  Like furniture, electrical fittings, Air conditioning, paints, interior designing, sanitary plumbing etc.   All such jobs will be undertaken by our Indian people & companies only. This shows that thousand of crorers rupee will come into our pocket.

If money comes to our Indians, an all round economic growth will happen.

And  since yet, Retail stores not had been start.  Now it requires all kind of consumer products (goods stock) & skilled & un-skilled manpower to run all such departmental stores.  By this way more employment can be generate and money goes to our Indian professionals & labour class.

Advantage to Manufacturing Sector: - This FDI in retail will boost manufacturing.  Small & Medium manufacturing unit will be benefitted a lot.  Such wall-mart & Tesco like big stores, will provide a “goods selling plate-form” for the product of small, tinny, cottage & medium industries .

Please note, that making of any product or consumer goods (as biscuits, tomato ketchup, chutni, cakes, Shurbat,Juice or any food stuff) is not a difficult task, but marketing of the product is very-very difficult,  that is why so many small & medium  manufacturers can not sustain in the market.  Such small manufacturers could not get fair price for their products, or even in-time payment, from the market/ selling dealers and bound to close their units.        

All big stores are now bound to purchase 30% of their purchase from small sector only.

All such big stores will provide an opportunity to all small manufacturers to sell their products, because these stores have their own brand value and consumers can get good products at cheaper

prices.   That is why in “Reliance Fresh” & Big Bazaar stores, one can see easily that beside “Maggie” Nodels various Indian local similar good products “Tasty fresh” & Reliance are available at more economical prices.

Inflation:-   This is an economic rule that more Shops create more competition & more competition gives cheaper prices for consumers.  This can watch easily at telephone-call rate, which is the lowest call rate in the world. Ii is only possible due to stiff competition & more service providers.

Same thing can be applied in consumer goods too.  This FDI will give a huge advantage to the consumers & Inflation can be checked.

This multi brand FDI create more retail stores and sooner consumer goods prices will automatically come down.

Advantage to Farmers :-   Farmers will get more prices for their products, due to availability of more purchasers.  It is very common that in-spite of low price of Agri. Products, consumers are bound to pay higher prices & it is only due huge margin created by various middle men.

More competition will not allow middle men to increase huge margin, which result cheaper price for consumer and good price for farmers.

Increase in Exports:-  When all such big retail stores comes to India, & see the Indian market, more possibilities are that our various new products of small sector can get export possibilities. (For example, when “SUZUKI” (Maruti) comes to India, our Auto parts & Components Industries flourish. Now India is the largest producer of small cars in the world.  All Auto manufacturers of the world are now purchasing auto components from Indian manufacturers including Mercidez, Ford, BMW etc etc.)

Even today WALL-MART is still purchasing Cotton Fabric, Terry Towel from Arvind Mills, Welspun Corp & from Grasim.  This list can be increase if they directly comes to India.

We Indian always learn from such foreign traders & manufacturers & upgraded ourselves time to time.

More  jobs :-   As per latest reports this Multi brand Retail will create more than 1 Crores Jobs in coming years.  ( 40 lakhs direct & 60 lakhs indirect jobs)

If our youngsters get more jobs, more money comes in to the market.  “Currency” word is from current & it always flows & moving from one hand to another hand.   

Myth & fats about FDI :-

So many political parties & various trade leaders are opposing. In fact this is only a political “slogan” (only a nara like “Garibe Hatao nothing more) against the ruing Govt. just to take, a political gain in coming election to mobilize the un-educated people of India.

Such people are saying……

·         We are going towards economic slavery.

·         Forigen  Multi brand Retail stores will destroy & close small “Kirana Store” of local Gali Mohalla, and Lakhs of small shopkeepers going to be closed

This is all rubbish & fake statements and far beyond the truth.

I personally think that all such political & trade leaders does not have any good economic knowledge.  It is only a “nara” Like “Bofors Kand, Jain Hawala Kand, Tabut kand etc. etc.  Earlier no facts of Scam ever come out.  But Unfortunately Honest MP “L.K.Advani ” & that time Delhi CM M.L.Khurana bound to resign due all such fake hypes and agitations.          

Our country produces more than 4.5 lakh engineers every year, more than 2.5 lakhs management professionals per year.  This shows our education level is growing rapidly. That`s why US president BARACK OBAMA  says in his lecture at Texas University that now young US students have to compete not only with other US students but to compete with INDIAN STUDENTS too. 

This shows that how our young generation is more concern about their education & carrier.  In today`s time Indian professionals are a “Guarantee” for the success of any company in the world.

·         Indra Nooyi, ceo Pepsi,  Vikram Pandit of City Bank, Ajeet Jain, (Warren Buffet), Shantanu Naryan (Adobe) Fransico D souza (Cognizant) Devan Sharma ( St. & Poors) Sabir Bhatia etc. etc. are a long list of Indian Management professionals, who are managing world top class companies.

In early fourties it happened, that Britishers take away Indians as bonded labour & slave, but now it could not be possible, situation is entirely different.  Our Indian businessmen & professionals are highly educated & talented, they knows business skills better than Americans & Europeons.  That is why in last 5-6 years our Indian businessman & Companies acquiring so many big companies of the world.

a.     Tata Steel acquiring Anglo-Dutch firm Corus Group in 2006 to create the fifth largest steel company of the world. The deal was worth $7.6 billion (  36,650 crore).

b.    Aditya Birla Group's Hindalco Industries, India's largest non-ferrous metals company, acquired the Canada based firm Novalis in an all-cash transaction for $6 billion.

c.    Tata acquired Britain's most famous automobile manufacturers Jaguar and Land Rover, in a $2.3 billion deal with Ford, their American owners. 

d.    Essel Packaging (EPL) acquired the Swiss tube packaging majorPropack, and joined hands to become the world's largest producers of laminated tubes.

e.   In 2006, Ranbaxy Laboratories(RLL) created quite a stir when it announced the acquisition of 3 drug-makers in Europe, all within a week's time. Allen S.p.A, a division of GlaxoSmithKline (GSK) in Italy, Romania's largest independent generic drug producerTerapia and drug maker Ethimed NV in Belgium.

f.    In 2007, Pharmaceutical and biotechnology major Wockhardt bought the fourth largest independent, integrated pharmaceutical group in France, Negma Laboratories. At a deal of $265 million, Wockhardt became the largest Indian pharmaceutical company in Europe with more than 1500 employees based in the continent.

g.   Mahindra & Mahindra acquired 90 percent stakes of Schoneweiss, a leading company in the forging sector in Germany. The deal took place in 2007, and consolidated Mahindra's position in the global market.

h.   Sterlite Industries, a part of the Vedanta Group signed an agreement regarding the acquisition of copper mining company Asarco for $ 2.6 billion in 2008. The deal surpassed Tata's $2.3 billion deal of acquiring Land Rover and Jaguar. After the finalization of the deal Sterlite would become third largest copper mining company in the world. 

This is only a small list in last 5 – 6 years our Indian businessmen acquire more than 725 companies of the world.   There is no question to worry by the entry of Wall-Mart, Carefur & Tesco like big stores.

Presently we do have various Indian big stores in our country, like Trent, Westside, (Tatas), Big-Bazaar, More (K.M. Birlas) Spencer Hyper, Reliance, Shoper Stop, Easy Day, Vishal Mega mart, etc. etc.  If any one think that due to the entry of Wall-Mart, our Indian Industrialist like Ambanis, Tatas, Birlas, Goenkas etc. etc will close their stores, he may be a great fool.

In fact Wall-Mart has to compete with our Indian Big stores, and our Indian Inc. had been proved themselves by acquiring so many companies of the world.  We are the most competitive people of the world. 

Small traders & Big stores have different type of customers.  There is no threat for small kirana shop keepers.  For business, Wall-Mart has to compete with our Indian existing big stores.

Why people appreciating & like Modern Big Retail Stores:-        

1.    Today`s time is a time of development & growth. We are one of the 2^nd. fastest, emerging economy  of the world. 

2.    No. of lower / upper & Middle Income group families are increasing rapidly.  (more than 25 crores)

3.    Life style of Indian people is changing very fast. We have more than 95 crore mobile subscriber.   As per purchasing parity of consumer durables, we are far ahead from Japan & 3^rd. country in the world after US & China.

4.    During last 8-10 years, life-style of our middle income group entirely changed, family infrastructure had been changed (more nuclear families), growing desires & high salary lead to get more luxurious life and use all modern consumers durables increased.  That is why “Luxry apartments” of 1.5 to 3- 4 crores,  Designer clothes, Luxry Cars, Electronics Gadgets, Costly mobile phones, etc. etc. are easily can see in all Metro & 2-3 tier big cities.  This is the symbol of our growing economy.

5.    There are more than 6 crore Credit card holders and purchases more than 1,22,000 crore in the year 2012-13   (small kiran shops did not accept any Cr. Card hence never effected)

6.     We can say that the “Ghost of Consumerism” is now comes out from the bottle and on the waves of High salary, easy availability of loans & money, Credit cards.  Our Indian middle income group is going to create a new history.   Growing condition of our middle income group is the result of “Pubs- Lounge Bar, Health clubs, slimming centre, & shopping malls.  All such can be watch in any big or small cities.     

7.    60% of our population is young below 30 years and these are the largest consumer of modern gadgets & consumer durables.

8.    As per world bank report, In the year 2010 only (6,41,44,151) six crore fourty one lakh fourty four thousand one hundred fifty one people travelled by Air in our country and this rate is growing now more than 15% year on year basis. 

9.    Every year more than 20 lakh of Indian families are going abroad for holidays.

10.  India is a destination, where no. percentage of growing “Billionaires” is increasing fastest in the world.  

11.  More than 50000 “Luxry- Cars” sold every year.

12.  As per Nascom report, we the Indians capture world`s 70% business of Software & outsourcing of Back office services.

13. More than 4 crore youngsters are working in IT services & BPO sector.

14. Our country purchases more than 1500 tones of Gold every year. (largest consumer of the world)

This consumer class is the customers of Big stores

These are some major factors which can not be ignored.   Now the whole world turned to be a global market, when our entrepreneur are allowed & welcome by other nations, why not we allow?  It must be a visa-versa.       

Entry of Any foreign Company always teach us, after the entry of “Suzuki” Maruti Car, our country become the world`s largest producer of small car.  Due to this our Indian auto ancillary Industry upgraded & flourished.  Now except engine, 99% of auto parts are manufactured in India.   Now every Auto maker of the world is using Indian components including Mercedez, BMW, Ford, GM, Fiat.  Now Indians are also designing the Cars.  Latest “Aston Martin” used in James-Bond films is designed in India.  Tata Motors purchases Britishers Pride “Land-Rover & Jaguar” cars unit, which makes Tatas as the world`s 1^st & only producers of Car, which produce world’s lowest price Car as well as Costlier Sedan Cars & SUV.    Same thing applies in “Pharmaceutical” Industry, after the entry of foreign Drug manufacturers like Pfizer, Sandvik, Glaxo, Rosche, Abbott etc. we became the largest producer of the world for Bulk Drugs.  Now our Indian Pharma Companies are become Multi National having manufacturing units in the all part of the World. 

This all shows that how the entry of Foreign Companies developed us.  This is the time to believe on the skill & effort of our Indian business class.

In India, Retail business is more than 400 billion dollar and percentage of organized sector is mere 4% (about 16 billion $)  If wall-Mart & other big foreign stores comes to India nothing will change and still huge playing level field. Market will still work with local un-organized sector because their consumers are un-tapped. (gali-mohalla kirana stores have direct person relation with there customers, even provide credit too, there consumers are entirely different)    

·          Stores to be set up in cities having over one million of population

·         The minimum investment would be $100 million

·         As much as 50% of the FDI brought should be invested in back-end infrastructure (such as warehouses and logistics) within three years of investment

·         - 30% of the sourcing should be done from the small and medium enterprises

Such norms are in FDI, than why we are crying?

This FDI in multi-brand retail will definitely give us huge advantage & all round development of the country.

  

FDI in multi-brand retail was a long-pending reform and the approval of the same would likely spur major investments in the sector. Besides improving the supply chain infrastructure, the reform is likely to lead to a moderation in the inflation rate and an improvement in the investor sentiment in the country.

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Article by YOGINDER SAXENA,

 Gen. Secy,  Indian Traders Study Circle