FDI Reform in Indian Retail

Now, when 51% FDI is allowed in multi – brand retail and 100% in single brand retail, let us see the possible effects of the reform:-

·         Supply Chain Efficiency

The most important impact will be on supply chain. It will bring efficiency and productivity to the farm – to – fork supply chain which will bring immense benefits  from farmers to small manufacturers and above all to consumers.

·         Investment in the back-end infrastructure like cold storage, packaging and other logistics

Investment will increase in back end operations like cold storage, packaging and other logistics. These large investments in infrastructure would lead to rise in farm productivity, manufacturing, food processing and cold storage, thereby leading to cutting down of wastage.

·         Price Reduction

It will create a much more efficient supply chain and prices will come down for the consumers. It will reduce considerable difference in farm gate prices, wholesale prices and retail prices. Competition will also result in price reduction.

·         Quality

Customers will get large assortment of great quality of goods. Consumer will get benefited by both price reductions and improved selection, brought about by the technology and know-how of foreign players in the market.

·         Put check on rising food prices and inflation

·         Employment opportunities at the bottom of the pyramid

The sector is now set to expand manifold and it will provide employment opportunities at the bottom of the pyramid. Retail is one sector where a lot of people come and join from the middleclass, people who are high-school pass. This will also enhance income level of working people.

·         Technology and good management practice

The introduction of Technology and good management practice will improve product availability and customer satisfaction. This will enable the up gradation of post-harvest, cold chain infrastructure, bring technology and management know-how, remove “structural inefficiencies in the supply chain” and benefit consumers in terms of cost and quality.

·         Competition

Foreign investments in the India retail sector will inject competition. This competition will enhance efficiency, improve quality and reduce price. This, in turn, will benefit end consumer.

·         Realty Sector

The realty sector too is cheered up for the move. They believe the move will be a big boost for the ailing sector. This development would allow the retail sector to build malls, which are more international in size and standards, have a better choice of retailers within the malls and have better capitalise retailers that can provide a better choice and stock to consumers.

·         Retail space rentals

Retail space rentals in India may go up as big global players try to expand rapidly in the country in the medium to long term.

·         Incentive for local producers

The global retail chains like Walmart and Carrefour will have to source at least 30 per cent of their requirements from small industries. Besides, they will be allowed only in cities with one million people. This would incentivize local producers to “scale-up” their production that would create multiplier effect on employment and income generation.

·         Local Vendors Repositioning

 Indian consumer is more likely to continue to patronizing the regular local vendors as these small stores offer superlative services like Home Delivery, Monthly Credit Account etc. The large format players will focus more on satisfying customers’ monthly needs of products and services.