Saturday, August 13, 2011

FDI IN MULTI BRAND RETAILS - CONTROVERSIAL RECOMMENDATION

The Committee of Secretaries of Government of India has recently recommended 51% foreign direct
investment in multi-brand retail. This recommendation has brought in on the surface a controversial policy proposed to be framed by the Government. The international retail giants as well as American and European Government have been lobbying with Government of India at all levels for persuading
foreign direct investors in retail sector. The prime minister, Dy. Chairman planning commission and several other top leaders of UPA are favoring this move. All India Chartered Accountants Society (AICAS) has through this column have already outlined in detail the negative impact which this decision can have on the Indian economy and on small retailers and wholesalers and most importantly on the common poor men as well as the middle income group. Internationally it has been observed by all who travel regularly that the goods of daily usage are many times costly in the retail stores run by these multinational giants, as compared to prices in India. It is expected that most of the goods will become about 2 to 5times costlier over a period of 5 years, in case the decision is implemented. The current practice of distribution in nearby areas, near to production centre is at
very low cost and distribution through small retailers having very low overhead ensuring lower cost of distribution. The multinational retail giants will not only eat away employment of all small retailer shops and wholesale merchants but will also create a tremendous pressure on medium and small size companies manufacturing and supplying various commodities and the goods of daily uses. Small producer may be replaced with large supplier who can provide packaged commodities all across India in a branded manner. Our Team has visited a number of African, Latin American and Asian countries where multi-brand retailing is operational and the prices of the goods are very very high, in spite of very low custom duty or other international trade barriers. The only items which are competitive price will be high end electronic or goods which are manufactured in large factories with severe
competition. The political leaders of our country may please re-examine this decision / proposal of the Committee of the Secretaries of Government of India and may take a decision which is in national interest.

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