Tag Archives: FDI in retail

Retail FDI is not just about Farmers, Consumers and Traders

The much-awaited policy decision to allow foreign direct investment (FDI) in multi-brand retail has become the most high profile reforms measure announced by the UPA government. It has not just been a booster shot for the UPA government—which seemed to be doing nothing right just a few weeks back—it has shifted the debate from corruption and policy paralysis to reforms, with businesses and middle class now finding themselves on the side of the government.

But what is the issue about? In short, those who support it argue that it will not only give consumers more choice (and hence more power), it will fetch better prices for farmers. Those who oppose it primarily argue that it will kill the small traders—the kirana store owners. So, the debate has essentially become one with small traders’  interest on one side and farmers’ (and to a smaller extent consumers’) interest on the other.

But here, we are missing out a really, really big point.

Wall-Mart is the largest civilian employer in the world, with more than 2 million employees. Tesco is the largest private sector employer in the UK. Woolworths and Wesfarmers are the two largest employers in Australia. Carrefour is one of the largest employers in the world, though because of its distributed business, it is not the largest employer in its home country, France. Sears, Target, Home Depot all feature among the largest employers in the US.

Wall-Mart employs more than two million people globally. In the US alone, it has 1.4 million employees—that is a little less than half a percent of the total US population. Tesco employs more than 500,000 people and Carrefour some 475,000 people. Both Woolworths and Wesfarmers in Australia employ more than 200,000 people each. Together, that is a little less than two percent of Australian population.

And how many employees does Futures Group—the largest retailer in India, a country of 1.3 billion people—employ? Just about 35,000 including its insurance and other businesses.

If you consider this aspect, there is not much to debate. The employment generation potential of organized retail sector is immense. And potentially widespread.

When IT came as a big bang service industry to India, it created a big employment opportunities. But that was restricted to a certain section of the society—the engineering graduates. And it created jobs in a few locations. The BPO industrt democratized it by providing opportunities to graduates, took the action to tier two cities, and reduced the time to impart right skill to these people to make them productive. Retail is the next logical wave. It will further democratize the organized services sector by  creating the jobs for those who have had some high school education, who can speak local language and maybe have some working knowledge of English. And the time to provide skill training to make these people productive reduces further.

The case of big box retail, hence, is justified, looking at it purely from an employment generation perspective.  It is sad our politicians and public commentators are missing the point.

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Filed under Indian Economy, Policy & Regulation

Sorry Amazon, You Are Not Welcome

Today, the government notified what it calls the circular 1 of 2012, its fifth six-monthly update on Consolidated FDI Policy, since it began doing so in March 2010.

In one of the major clarifications that will impact e-commerce in India, the policy has clarified that “existing restrictions on FDI in domestic trading would be applicable to e-commerce as well.” Which means a foreign company cannot take either the automatic or government route to invest directly in a retail e-commerce venture in India. However, like in offline retail, it allows FDI B2B e-commerce. In short, all the rules of FDI that apply to offline retail would apply to e-commerce as well.

This is the first time that the government has clarified its stance on e-commerce. Earlier this year, in a column that I wrote in Dataquest, titled, Stoped FDI in Retail? Here Comes E-commerce, I wrote about this anomaly. “Online retail is not defined as retail by today’s government definition,” I pointed out that time.

Most of the e-commerce ventures, though, will not be affected, as few, if at anyone at all, has FDI investment. In fact, Amazon, which has been eyeing Indian market for a long time was not taking the big step anticipating this policy stance. So, it entered with junglee.com, a sort of marketplace, in the likes of eBay but targets different kind of sellers, mostly the e-commerce service providers. This India-specific services serves as an aggregator platform.

However, the market was rife with speculation that Amazon wanted to buy out Flipkart. It was even speculated that the two parties were in negotiation but there was valuation mismatch.

With this clarification, though, for the time being, any plan of Amazon to enter Indian market directly selling to consumers, has to be shelved.

 

 

 

 

 

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Filed under Digital Business, Indian Economy