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Old 30th November 2011, 12:18   #61
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

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Originally Posted by avira_tk View Post
The evil middleman is not going to disappear just because the foreign retail giants enter the market.
They will, if things go in the right direction and over a long period of time. Any huge transition in economy takes time, same as people's habits. Before everything changes for good there will be uproar (on streets and parliament) few people complaining but essentially in the long run this will happen is what i believe (also this is what the government is intending to do as well).

How will it happen (I am not really sure), but with a small start folks (read states govt, and public) will hopefully see some value and more will likely to follow and would want to have big players in their state. Then we possibly would have walmart's procurement centers in every state.

We may not believe that this can happen, but it has happened in the past. It would be similar to what Amul did to dairy farmers of Gujarat. Now we all can see the difference, other dairy companies have followed Amul to do something similar in every state. Today there are no middleman in Milk procurement (a.k.a agents) read (Amul - Wikipedia, the free encyclopedia).

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Old 30th November 2011, 13:02   #62
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

And to think Spencer's (largest retail chain in S.India opened in 1990s) had no effect on small shops ....
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Old 30th November 2011, 13:12   #63
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

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They will, if things go in the right direction and over a long period of time. Any huge transition in economy takes time, same as people's habits.
The co-operative model of Amul is not observed by any of the retail giants, Amul started as an alternative to Polson which was a private player that effectively rigged the market. I am not aware of the whole story, but it was named in a TV special about Verghese Kurien and Amul. The middleman's place will be taken by the employees. Cadbury was eagerly promoting cocoa cultivation in Kerala at one stage, the skeptics had only one question about the guaranteed price - What if they refuse to lift the stock? Sure enough, the promised price wasn't given, the growers were stuck with stock which no one wanted.
The farmer will hardly see any benefits, bananas in western supermarkets are a good example, the grower gets 10% of the sale price, the sourcing point about 30% and the supermarket around 40%. This is an example of one commodity. Organised retail on the walmart model is not possible here, maybe another 20 years or so will see them dominating the market, but to think that farmers will benefit while customers pay lower prices at checkout is illogical.
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Old 30th November 2011, 13:29   #64
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Default Re: FDI in retail

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We are constantly short of food (One of the reasons inflation in food prices are highest, shortage of supply). Fiscal measures (like raising interest) are not working because there is a supply side shortage and no monitory policy can work in this situation.
Actually there is another important reason for this; commodity trading (futures). Till that is banned, food prices will not stabilize.
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Old 30th November 2011, 13:53   #65
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Default Re: FDI in retail

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Actually there is another important reason for this; commodity trading (futures). Till that is banned, food prices will not stabilize.
Agreed it is systematic speculation - BUT do you think banning it will stop the speculation?

Food for thought - there are no onion futures (AFAIK). Yet - every year its prices top Rs 50 (even as supplies are quite plentiful) and the government professes its complete inability to check prices.

Even the big retail chains can do nothing - max they may sell at a 10% discount to the small shop owner but even they sell at the (suddenly hiked) going prices.

That said, I think we're missing a basic point - if I were a decision maker in Walmart - would I ever want to invest significantly in this country?
- The lawmakers are complete cartoons with no permanent agenda (NDA proposed retail FDI and now is opposing it - there's little sensible constructive debate!!)
- There is a general perception of large format retail being evil (i again refer to some problems in UP two years back against our desi chains only) and even more so if its foreign.
- There is frankly little rule of law that comforts a foreign investor in retail (look at how Tata has suffered losses in Singur) given the murky real estate scenario in this country (so much black money & shady characters)

I mean, we're a promising country for them, but currently we present a picture of chaos to any foreign investor that is not a pretty one by a long shot.
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Old 30th November 2011, 14:01   #66
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

^^I agree. But speculation should happen despite the Govt and not because of it.

As for large retail stores, I welcome them with or without FDI.

FDI in retail will happen sooner or later. There will be noise till all the politicians are paid off, that is all.
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Old 30th November 2011, 14:15   #67
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Default Re: FDI in retail

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Do we know how much is Food wastage in India, because the Government godowns are limited and they dont have space to store more? Last year alone it was 12+ Billion $ worth of food was wastage.

Do we know how much a farmer sells his produce for and the middleman take the rest?

The problems with Indian Food chain are many, these are just the few which can be addressed.

We are constantly short of food (One of the reasons inflation in food prices are highest, shortage of supply). Fiscal measures (like raising interest) are not working because there is a supply side shortage and no monitory policy can work in this situation.

Given the above i thing this is wise thing to do, and get something in return as far as international politics is concerned. Employment generation is another plus. With large retailers they ensure the wastage is minimal and build their own capacity, this would bring down the overall wastage.

Apart from the this benefit for generation employment for large number of folks is also a plus.

Now the problem for local nearby store. Do you think to buy something small (for everyday needs) i would drive to the 5Km away Walmart of get it from the guy next door (small shop owner) in 5 min walk?

For monthly needs i anyway go to places like SPAR/Spencer.
Food inflation is due to supply constraints is right but it was a created supply shortage.

India has enough food grains ( almost double the buffer stock and it is rotting in FCI warehouses)

This govt is refusing to release the surplus food grains in to open market in spite of clear cut supreme court order's

If one were to pay some attention to the food price rise, it is clearly discernible that it has started all of a sudden immediately after 2009 general elections.

Beofre elections superfine quality rice was around Rs 22 per kilo in bangalore and hyderabad. Immdeiately after elections it became Rs 30/ and then it went on to become 40.

Who benefits from this?

Your neighborhood kirana guy? does he have own storage facilities where he can hoard and get benefit out of this rise?


Or

The Large retailers who buy in bulk at the time of harvest, stores in own warehouses and can manipulate buffer stock release from govt of india resulting in skyrocketing prices.

Who benefits?
Relaince, more, big bazzar or kirana guy's

Now govt wants to allow even bigger giants than what we already have.
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Old 30th November 2011, 14:27   #68
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Default Re: FDI in retail

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Originally Posted by avira_tk View Post
The farmer will hardly see any benefits, bananas in western supermarkets are a good example, the grower gets 10% of the sale price, the sourcing point about 30% and the supermarket around 40%. This is an example of one commodity. Organised retail on the walmart model is not possible here, maybe another 20 years or so will see them dominating the market, but to think that farmers will benefit while customers pay lower prices at checkout is illogical.
Fair point, i am not knowledgeable enough to comment on the specific case of bananas. Just a question, why aren't banana growers selling it to someone else and not Walmart? Aren't other players not there to buy the bananas from the growers?

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Food inflation is due to supply constraints is right but it was a created supply shortage.

India has enough food grains ( almost double the buffer stock and it is rotting in FCI warehouses)

This govt is refusing to release the surplus food grains in to open market in spite of clear cut supreme court order's
Not sure about this, just tried to research and found this (Rotting food: Three FCI officials suspended). Maybe the govt is trying to do things but bureaucracy (not very efficient) is making it difficult for them to do it in smooth manner, or you also may be right. Nevertheless a fair point, and unless we have some data to prove the correct side of story.

Oops, apologies. Got some data (http://www.deccanherald.com/content/...i-godowns.html). Now are we sure if this was done by the whole govt or some specific minister in the govt (you know who i mean, cant take names not sure if its against the forum rules)

If this was done by someone specifically in the govt to benefit some of the retailers, don't you think it would be better if bigger players were there in the market it would have been difficult for the said minister to do this?

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Old 30th November 2011, 15:12   #69
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

All those in favour of FDI in retail and suppport the view that it will squeeze out the middleman and bring prosperity to farmers, how do you argue against these lines courtesy of rediff.com article ...

"The argument is that the supermarket chains will squeeze out the middlemen thereby providing higher prices to farmers and at the same time provide large investments for the development of post-harvest and cold chain infrastructure.

All these claims are untrue, and the big retail has not helped farmers anywhere in the world.

Even in Latin American countries, including Brazil, Argentina, Uruguay and Colombia, where supermarkets, most of them owned by multinational giants, now control 65 to 95 per cent of supermarket sales, farmers have been forced to quit agriculture.

If the supermarkets were so efficient and provided dynamism, I would like to know why the US is providing a massive subsidy for agriculture.

After all, the world biggest retail giant Wal-Mart is based in America and it should have helped American farmers to become economically viable.

But it did not. American farmers have instead been bailed out by the government, providing a subsidy of Rs 12.50 lakh-crore between 1995 and 2009, and this includes direct income support.

And that is why the American farmers are being supported in the form of direct income support by the American government.

It is the massive farm subsidy that supports agriculture in the US. If this subsidy, classified under Green Box for WTO calculations, is withdrawn (as analysed by UNCTAD-India), US agriculture collapses."

http://www.rediff.com/business/slide...m/20111130.htm

Excellent article opposing FDI. Interesting read.

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Old 30th November 2011, 15:22   #70
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

Futures trading has existed forever, its quite a convenient way of securing cash flow. The speculation part will always exist, however banning it will just make the farmer insecure as no real reference to prices will exist at harvest time. There is no obligation on the part of the growers or sellers (different entities in this context) to make food affordable, its a business and a means of livelihood. The loss leader model of business, pricing alcohol below cost price to encourage footfall, will not work in India as alcohol is tightly regulated, the new players will have to contend with astronomical land prices, expensive and scarce labour, poor road connectivity and a not too rosy power supply(needed every step of the supply chain), the immediate threat does not exist and we have to wait till they open to see what exactly they will offer that makes local supermarkets squirm. The biggest beneficiaries maybe the local players who have built up front end scale to cash out.
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Old 30th November 2011, 15:33   #71
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

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All those in favour of FDI in retail and suppport the view that it will squeeze out the middleman and bring prosperity to farmers, how do you argue against these lines courtesy of rediff.com article
Thanks for the post, could you point us out to the article link please. I read this on rediff.

How FDI in retail will help consumers, farmers, economy - Rediff.com Business

Farmers in India today receive a small share of the end consumer price. As an example, for tomatoes, farmers in India earn only 30 per cent of consumer price, while in more developed markets this is in the 50-70 per cent range.

Citing some examples, Bhatia said that global retailer Carrefour sources 90 per cent of its material from local small and medium enterprises.


Another Article - http://www.rediff.com/business/colum...d/20111125.htm

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Old 30th November 2011, 15:35   #72
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

I have edited my previous post and given the link to the rediff article.
Would encourage all to read thru that multi-page article thoroughly. Good food for thought.
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Old 30th November 2011, 16:00   #73
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

Excellent article. Amul like co-operative movements and more Farmer's markets only can work for the benefit of farmers in a country like india.
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Old 30th November 2011, 16:16   #74
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

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Originally Posted by WindRide View Post
A

If the supermarkets were so efficient and provided dynamism, I would like to know why the US is providing a massive subsidy for agriculture..
This point has nothing to do with Supermarkets and retail FD.
World wide, if you see agriculture is not really a profitable market, esp where land is expensive.
Case in point. Fertile agricultural land near major highways goes for 1 crore/acre.

A farmer with 5 acres has more profit if he sells it and put money to buy commercial property which can be given on rent, than planting crops.

If farm subsidies and benefits go away, nobody will be interested in growing food, because you can make much more money if you do not grow food, but sell it for urban development. Already, fertile arable land near big cities of punjab is covered by "new colonies" because farmers thought it to be much better financial sense.
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Old 30th November 2011, 17:04   #75
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Default Re: FDI in retail

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Fair point, i am not knowledgeable enough to comment on the specific case of bananas. Just a question, why aren't banana growers selling it to someone else and not Walmart? Aren't other players not there to buy the bananas from the growers?



Not sure about this, just tried to research and found this (Rotting food: Three FCI officials suspended). Maybe the govt is trying to do things but bureaucracy (not very efficient) is making it difficult for them to do it in smooth manner, or you also may be right. Nevertheless a fair point, and unless we have some data to prove the correct side of story.

Oops, apologies. Got some data (Food grains rot in the open as prices rise). Now are we sure if this was done by the whole govt or some specific minister in the govt (you know who i mean, cant take names not sure if its against the forum rules)

If this was done by someone specifically in the govt to benefit some of the retailers, don't you think it would be better if bigger players were there in the market it would have been difficult for the said minister to do this?

It appears you did not get my point. Ordinary kirana store owner or their association is not big enough to effect a policy decision like storing double the buffer stocks.

Guy with deep pockets who talk in 100's/1000's crores can easily have access to power's that be, to change the policy to suit them.

Kindly go the nearest supermarket or mall and check the prices of essential commodities ( like rice, wheat, dal etc) and check the prices in nearby grocery store. they prices are anywhere 30-40% higher in malls/supermarkets. They get their margins only in this not on MRP products. that is why nowadays all these supermarkets like reliance, more etc are going for own brands of salt, atta etc.


In India it is the middleman who makes most in any field. This FDI will replace small middle man to some extent with even bigger middleman who can become a monopoly cartel in future

Especially so, if one takes into account the way policy decision's are made in the last two decades

If one keeps track of the things , they might have come across the lobbying made by rice miller's lobby to get rice export permits recently. when rice is at Rs 30-40 per kilo these guys want to export so that domestic price will remain same and the excess they stored will not be damaged, as it can be exported.

who is at loss? Indian public, because Govt money is their money. GOI has procured double the buffer stock requirement and allowing it to rot? So whose money is rotting.

By doing so Govt is allowing the retails prices to remain high and benefit the interested parties
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