[PGA]

Just a small example to underline points brought out in the earlier posts.

It is a stated and documented fact that in the last FY highest VAT payer in the most prosperous town of Punjab was a McDonalds outlet. This city boasts of business houses such a Hero Cycles, Vardhmans, Oswals and many many more and has probably highest concentration of luxury cars per capita.

Then the question is, who is contributing more sincerely to the nation building? An organised business or a family run?

[avira_tk]

Originally Posted by sgiitk

I am all for it. At the moment a huge percentage of perishables (fruit & veg) are spoilt in the absence of a cold chain. They go through multiple middlemen leading to higher cost and wasted time. I know after Mayawati messed up Reliance Fresh may farmers were very unhappy. They had bee promised far higher prices. The farmer gets more, we pay less. Who loses- the middlemen. Let them stew. These chaps are smart enough to find some other line of work.

The GM thing is vastly overblown. An MNC does not mean automatic entry of GM stuff!

What will these jokers do about Indian retail giants. Send them to the Arabian Sea or Bay of Bengal. Even today in Germany the bulk of retail is small shops.

The government allowed FDI in cold storage facilities ages ago and there has been no worthwhile investment in that sector. The farmer makes more and we pay less - how does that work, if the procurement cost is high, overheads will mean they cost even more - higher rent, labour, taxes and not to mention inflated salaries for a new class of middlemen.

Quality control and standardisation in a super market supply chain adds to the production cost of a farmer, so a higher price is necessary at the farm gate - which will be recovered from the customer.

Germany is an odd example to choose, big retail is tightly controlled and Walmart style discounting is not possible. There are limits to below cost selling which Walmart does to wipe out the competition. Walmart packed up from Germany after customers found their products, policies and general behaviour disgusting.

Discount chains hardly exist in India, all we have are large format stores that sell everything at MRP.

[travelwriter]

I am against FDI in retail for the following reasons.
1. FDI in retail is not going to help the consumer in any way except availability of multiple brands under one roof
2. This is not going to serve the biggest need we have at the moment - infrastructure development
3. Foregin companies will not do anything much - things like logistics, which have been largely ignored so far, can be handled by our govt and administration
4. This is only going to result in a glut of Chinese sub-standard products in every shelf. Even milk cartons, eggs and vegetables are going to be 'made in China'
5. Smaller retailers will get killed
6. Foregin retail outlets will start with heavy price discounting and exciting offers and once their volume share crosses 3%, they will start fleecing customers
7. Govt is going to wake up after 7-8 years and realize that much damage has been done which cannot be un-done
8. Considering our 'efficient' quality monitoring, we will end up being the dumping ground for all 'made-in-foreign-but-rejected-there' products.

It is sad that, instead of focussing on core infra industries, like steel, roads amongst others, the govt is content with FDI in retail and service sectors. We do not need our economy to run on the basis of services alone. We already have a huge contribution to GDP from services (software, telecom, et al). We need a strong foundation for future growth. And that can come only from agriculture and manufacturing. Unfortunately, these are the most neglected sectors of all.

Ridiculously myopic FDI policy by the government.

[zoombiee]

Originally Posted by travelwriter

I am against FDI in retail for the following reasons.
1. FDI in retail is not going to help the consumer in any way except availability of multiple brands under one roof
2. This is not going to serve the biggest need we have at the moment - infrastructure development
3. Foregin companies will not do anything much - things like logistics, which have been largely ignored so far, can be handled by our govt and administration
4. This is only going to result in a glut of Chinese sub-standard products in every shelf. Even milk cartons, eggs and vegetables are going to be 'made in China'
5. Smaller retailers will get killed
6. Foregin retail outlets will start with heavy price discounting and exciting offers and once their volume share crosses 3%, they will start fleecing customers
7. Govt is going to wake up after 7-8 years and realize that much damage has been done which cannot be un-done
8. Considering our 'efficient' quality monitoring, we will end up being the dumping ground for all 'made-in-foreign-but-rejected-there' products.

It is sad that, instead of focussing on core infra industries, like steel, roads amongst others, the govt is content with FDI in retail and service sectors. We do not need our economy to run on the basis of services alone. We already have a huge contribution to GDP from services (software, telecom, et al). We need a strong foundation for future growth. And that can come only from agriculture and manufacturing. Unfortunately, these are the most neglected sectors of all.

Ridiculously myopic FDI policy by the government.

Let me reply point by point -
1. FDI in retail is not going to help the consumer in any way except availability of multiple brands under one roof
They can get you more products at lesser price. What more is needed out of retail for a consumer?
2. This is not going to serve the biggest need we have at the moment - infrastructure development
Big retail chains cannot succeed if the related infrastructure like warehouses/cold storage is not in place. They will have to invest in those if they need to make money.
3. Foregin companies will not do anything much - things like logistics, which have been largely ignored so far, can be handled by our govt and administration
In retail, profit margin is mainly based on intelligent procurement and intelligent logistics. If you say foreign companies will not to much with logistics you have nothing to fear about. They will be wiped out in less than 5 years.
4. This is only going to result in a glut of Chinese sub-standard products in every shelf. Even milk cartons, eggs and vegetables are going to be 'made in China'
I think there are quite a few import related rules which will prevent it. Have you seen sub standard impored chinese milk veggies and eggs in Reliance Retail, More, Total et al? Whats stopping them from importing them if its so lucrative?
5. Smaller retailers will get killed
On the contrary no. Smaller retailers will provide last mile reach which big retailer cannot provide. The small retailers themselves will benefit by procuring from these big retailers.
6. Foregin retail outlets will start with heavy price discounting and exciting offers and once their volume share crosses 3%, they will start fleecing customers
Are the customers dumb. Any retailer who resorts to such tactics wont have any customers. Also, competition amongst themselves and market forces will not allow them to do it.
7. Govt is going to wake up after 7-8 years and realize that much damage has been done which cannot be un-done
What is needed is for the govt to setup proper rules/processes in place today. The idea of FDI in retail is good.
8. Considering our 'efficient' quality monitoring, we will end up being the dumping ground for all 'made-in-foreign-but-rejected-there' products.
Nothing can be imported without paying duty. Also, if there is a demand for such products, what is the harm? Govt cannot control demand.

Indian retail companies have little or very less knowledge about running retail chains. Most of them have failed very badly. They have no idea on intelligent sourcing. Most have supply chain departments with people who know nothing about supply chain. They do planning with excel sheet based macros. Getting foreign players in will bring in much needed retail expertise into the country.

On another note, the black money in the country will come down. The traders are known as a big source of black money in the country.

[travelwriter]

Originally Posted by zoombiee

Let me reply point by point ...black money in the country.

I agree with all the points that you have mentioned completely. My take, however, is different.

FDI in itself is not going to help us or consumers in any way. The Big Bazar, More, etc chains can manage that. So can localized chains like Arambagh in Bengal and so on.

All those that you have mentioned should be done by our govt which they are not doing. And instead, they portray FDI as the only mode to do that. It is this conclusion that makes me posit that FDI is not needed in this sector.

Chinese produncts will find their way into daily consumables like milk and veg soon. We already have them selling stuff outside in smaller towns (where our media are not interested in going!). In the same big retail stores, you will find all furniture, household appliances, home-use materials (like cloth hangers, ironboards, etc) are all made in China. No guarantee, no warranty. And the govt will turn a blind eye to this as well.

I am for FDI. But in the right areas. Get foreign companies in investing in building capacities in logistics, storing / warehousing or at the most wholeselling.

A country of over a billion people doesn't need investment in services. We are capable of doing that.

[ike]

FDI in retail is something we don't need. The Govt. has ignored the supply chain all these years and I honestly don't think it can be turned around overnight by anyone. The big retail houses have really deep pockets, which means they can kill the small retailers by under cutting the prices. Once they do that, they can dictate terms to the producers & consumers. The jobs that they will generate will not accommodate all the people they will displace. The union Govt., by leaving the implementation at the discretion of the states just paved way for more corruption. These people may try & bribe the people who are not really interested in having them in their states at the moment.

[tsk1979]

I am a little confused about chinese products entering market?
Aren't they there already?
Is there a clause in the FDI bill passed by the cabinet which gives extra sops to the chinese?
I did not read about extra sops to chinese in the FDI in retail bill.
All I understood was that now a foreign entity can open a store here?
It will have to follow all the rules big Bazaar follows. So where did the china angle come in.

[samarjitdhar]

Originally Posted by travelwriter

Chinese produncts will find their way into daily consumables like milk and veg soon. We already have them selling stuff outside in smaller towns (where our media are not interested in going!). In the same big retail stores, you will find all furniture, household appliances, home-use materials (like cloth hangers, ironboards, etc) are all made in China. No guarantee, no warranty. And the govt will turn a blind eye to this as well.

And thereby by adopting the Chinese model of the population optimization program where untested products with toxins are introduced into the market, our government would have proven the success of the theory of free market regardless of some thousands of deaths . But how does that matter the completely unregulated and free market theory must triumph at any cost.

Originally Posted by travelwriter

I am for FDI. But in the right areas. Get foreign companies in investing in building capacities in logistics, storing / warehousing or at the most wholeselling.

You are right. The government has long ago abdicated its responsibilities of setting up up infrastructure, logistics which is clearly laid out for it. While they are giving away precious resources to who can contribute to their burgeoning election coffers which stands at Rs 1600 upwards now they claim they have no money to spend on what India direly needs. I for one cannot understand how Walmart will come up and create infrastructure in terms of roads and set up connectivity before they start operating. Also setting up warehouses for use by the farmers. The way Walmart has benefited in the US is because there was a government built strong infrastructure read network of highways and roads which let Walmart connect to anybody it wished to. In fact that is a single biggest contribution why Walmart has succeeded of course apart from suspect employment practices. So is the expectation that Walmart will build this infrastructure for us first? Or common storage facilities for farmers in some remote parts of India which incidentally could be shared by its competitors? The GOI has successfully glossed over all these details and just thrown out a big red herring for everybody to divert attention from their woes with Coalgate

[travelwriter]

Originally Posted by tsk1979

I am a little confused ..So where did the china angle come in.

I agree it is not linked to the FDI policy per se. However, today, the way retail industry operates, the revenue per sq.ft of space plays an important role. This leads to increasing footfalls in the store. This increase in footfalls cannot happen with a handful of products or product categories. Further, stocking up branded goods requires high level of inventory costs. Therefore, the mantra retailers will follow is low investment -> high inventories -> low accountability = Chinese goods.

That is why I had included the Chinese products angle in my post.

But you are right about the Chinese products being ubiquitous in our country right from hairpins to buses, trains and everything in between. I remember reading about a power grid transformer that broke down in Haryana and the some parts of the state were left without electricity for 2 days. Root cause? Chinese substandard equipment was used because they were cheaper.

[ike]

Originally Posted by tsk1979

It will have to follow all the rules big Bazaar follows. So where did the china angle come in.

Is the retail industry tightly regulated here ? Are there any regulatory bodies that ensure that the people currently in the scene(reliance, big bazar etc) play by the rules ? I remember seeing in a news channel how reliance took cultivation land on lease & cheated the farmers by giving them peanuts.

[sgiitk]

Originally Posted by avira_tk

The government allowed FDI in cold storage facilities ages ago and there has been no worthwhile investment in that sector. The farmer makes more and we pay less - how does that work, if the procurement cost is high, overheads will mean they cost even more - higher rent, labour, taxes and not to mention inflated salaries for a new class of middlemen.

Quality control and standardisation in a super market supply chain adds to the production cost of a farmer, so a higher price is necessary at the farm gate - which will be recovered from the customer.

I will not expect the clod chains without any outlets. UP blocked Reliance Fresh after they were set up! So the chaps want to have the retail outlets before they invest.

QC and standardisation is not that tough. Pepsi is doing it for Potatoes and Tomatoes, amongst others in Uttarakhand. What I hear Reliance is being doing is to have one layer of agents, at the farm level, then they take over. I am sure these chaps are not stupid and methods will evolve. Whatever one may argue on level of brokers to replace four or five, and reduction in wastage can only be positive.

If FDI is all that bad they will run with their tails between their legs, like all the one tonne trucks with Japanese tech did not that long ago.

[tsk1979]

Originally Posted by travelwriter

I agree it is not linked to the FDI policy per se. However, today, the way retail industry operates, the revenue per sq.ft of space plays an important role. This leads to increasing footfalls in the store. This increase in footfalls cannot happen with a handful of products or product categories. Further, stocking up branded goods requires high level of inventory costs. Therefore, the mantra retailers will follow is low investment -> high inventories -> low accountability = Chinese goods.

That is why I had included the Chinese products angle in my post.

But you are right about the Chinese products being ubiquitous in our country right from hairpins to buses, trains and everything in between. I remember reading about a power grid transformer that broke down in Haryana and the some parts of the state were left without electricity for 2 days. Root cause? Chinese substandard equipment was used because they were cheaper.

So by your own admission, chinese products are finding favor even in the public sector. Again, I could not figure out what does this have to do with FDI in retail?
Even today, all the torches and small LED stuff found in retail shops. whether mom and pop stores. local supermarkets. or big chains are chinese. So with FDI what difference does it make?

Originally Posted by ike

Is the retail industry tightly regulated here ? Are there any regulatory bodies that ensure that the people currently in the scene(reliance, big bazar etc) play by the rules ? I remember seeing in a news channel how reliance took cultivation land on lease & cheated the farmers by giving them peanuts.

Again, corruption is rampant in the country. What does this have to do with FDI.
And what regulation. You can import anything from china in bulk. It will come to customs office, you will pay duty and VAT, and you can sell it.
Lots of sellers are selling chinese toys, torches etc.,
No relation to FDI in retail at all.

Again, make an argument based on facts. Not that in 1948 a fellow fell from the bus so with FDI in retail entire bus will fall in river

[vikrantj]

Circa 1992 we "opened" up our markets , we deregulated and privatized businesses. Incidentally brain behind all this Manmohan Singh.
Who suffered due to these policies at the time "the common man" . Did it help reducing the gap between rich and poor -no . All the money which could have been spent in common man's upliftment was now diverted to subsidies.
Take an example of Kerala . By and large the fishing industry was traditional one. Hugh chinese nets or so they were called . The supply and demand was met without a hitch also as a by product the ecological balance of fishes and the sea was maintained since during monsoon fishing never happened.
After we opened up out fishing borders we started allowing foreign trawlers to come in Indian territorial waters , fish and WITHOUT informing the customs go away. Now what was the effect of this :
1. Custom duty loss for India. This is like exporting away Indian produce without export duty.
2. Local and small fishermen suffered since as we know the best fish are found near land and not furthur in the oceans (marine biologists may want to correct this). This was scooped up in large quantity by trawlers and taken away. I saw a documentary on Nat Geo where a local fisherman was actually crying his heart out saying that all but one of his nets are non-functional.
3. Ecological disaster since the fishing happens 365X24X7 so fishes reproduction cycle is never accounted for. The quality and quantity of fish droppped drastically thus devalue-ating the produce.

We have many such live examples in front of us. Now somebody said aren't Tata's and Biyanis and Birla's doing the same. Yes but ultimately the money stays in India. That money can easily be recovered by taxation and more importantly political will. I mean isn't it easier to find hidden money in your own house rather than the neighbours.

[zoombiee]

Originally Posted by travelwriter

FDI in itself is not going to help us or consumers in any way. The Big Bazar, More, etc chains can manage that. So can localized chains like Arambagh in Bengal and so on.

Let me again get back on this one point at a time.
Indian Chains filling the retail gap - Most Indian retailers are bleeding money. Future group/Reliance/RPG/ABG all of them are loosing money in retail. They are loosing money because they do not have strong supply chain departments and have not invested in back end sourcing. They will keep on bleeding and die. (Take Subhikha for example).
Government doing it instead of FDI - This has been a historic problem in our country. The government should not be in the business of running businesses. They should simply govern. The government cannot hire/manage/motivate the best minds in the nation. More over it is not their area of strength. FDI is a mode of getting outside money to fund this growth. If government makes a company and floats a ipo around this I myself wouldnt invest in it.
Chineese products -
This is an issue with government and governance and not FDI. (Its the same government you trust with building infrastructure)

About where FDI should be allowed - Foreign companies should come to India, spend their money, but not get their slice of the pie. This is pretty weird. How would a logistics company be successful if their consumers do not know how to run their business.

"A country of over a billion people doesn't need investment in services. We are capable of doing that."
Again you are wrong here. Retail at the end point is a services industry. We do that very well. We do not understand the science that goes into getting that end point operating profitably.

[zoombiee]

Originally Posted by vikrantj

We have many such live examples in front of us. Now somebody said aren't Tata's and Biyanis and Birla's doing the same. Yes but ultimately the money stays in India. That money can easily be recovered by taxation and more importantly political will. I mean isn't it easier to find hidden money in your own house rather than the neighbours.

I am not sure how fishermen from one country can go into the waters of another country (legally) and fish. Is this legally happening because of open marker policy? Or is this happening because they setup shop here? What about the employment they have generated and the taxes that they have paid?