Are FDI fears unfounded?

Fears are being expressed over the impact the entry of multinational retail chains would have on the retail sector, particularly the local kirana stores. The state government has said that it wouldn't allow FDI in retail in the state. But, there may be a change in the stance a couple of years down the line. Stakeholders talk to DNA about their take on the subject.

A few raise voices against FDI in retail

“Being bulk purchasers, Wal-Mart and others will get products at cheaper rates compared to a small retailer. How would the small retailer be able to face competition from the giants? They will get wiped out. Therefore, poor who buy grocery on credit will have to suffer, or will end up paying much higher prices.”

Kamlesh Shah, secretary, The Ahmedabad Grain Merchants Association

“Local retailers will need to modernize. They take care of products themselves and have proper knowledge about storage. Foreign retailers do not know the Indian climate. Here, there is greater chance of food rotting and wastage. Local retailers, however, understand customers and provide customized service, which foreigner players may not be able to.”

Arvind Patel, vice president, Ahmedabad Retail Grain Merchants Association

“International retailers belong to Europe, where dairy farmers get 35% to 40% of total consumer spend. The mediator eats up the bigger chunk, because of which dairy farmers there strike every few months. A similar situation may arise in India. FDI seems difficult in Gujarat as state is unlikely to allow that.”

RS Sodhi, MD, Gujarat Co-operative Milk Marketing Federation (GCMMF)

“It is early to say how harmful foreign investors will be for farmers. Despite local companies entering organised retail, inflation has continued to rise and more farmers are committing suicide. Multinational retailers in India may cause loss to farmers and consumers. If there was a way to widen farmers’ margin without consumers suffering, it would have been introduced long back.”

Magan Patel, president of Bhartiya Kisan Sangh (BKS)

While others welcome the move

“Supermarkets are meant for bigger purchases. A customer goes to an unorganized retailer to buy smaller quantities. In a nutshell, the quantum of business at grocery stores will reduce, but they will not close. A controversy had erupted when local companies opened malls. Several have closed since, but grocers continue to do business.”

Dr Rakesh Bhavsar, management consultant

“The realty sector is eagerly waiting for foreign companies to invest in Gujarat. They should open stores in villages to control urbanization. People relocate to cities for a better life. This will improve lifestyles across India. Spending will increase, driving economic growth. It will be a win-win situation and consumer will be king. Even employment will rise.”

Jaxay Shah, national vice-president of Credai

“Middlemen have at least 50% share of any product. Wal-Mart, which has stores in Punjab, started working with farmers’ co-operatives. Customers get price benefit and farmers’ margins widen as middlemen are eliminated. Also, quality is at par with that in the West. Employment will also increase.”

Dr Prodipta Sen, VP- Marketing, Corp affairs & retail, Alpha G Corp

“With MNC retailing in India, intermediaries will become history. MNCs buy directly from farmers and sell to customers. Margins of farmers widen and the cost will come down for consumers. Intermediaries, whose share is around 40% to 50%, will drastically lower. Grocers will be affected in cities but will provide better services. I don’t see any impact in rural areas for five years.”

Purushottam Sidpara, a wheat farmer from Junagadh