Friday, December 16, 2011: 11:32:48 PM

Retail Poll Feature

Removing the single brand retail cap

While controversy rages, opening of single brand retail to FDI seems likely in the near future; survey provides mixed response

The controversy surrounding the opening up of the retail sector to FDI has made headlines all over yet some of the direct consequences of the policy still remain unclear. While some experts believe that the entry of FDI in single brand retail will be a boon for the consumers and the massive size of the market will not hamper businesses of the small retailers, some feel that the smaller domestic counterparts will not survive the entry of the large international players into the competition.

In a recent survey by Retailing360, 40% of the voters felt that the removal of the cap in single brand retail, as proposed by the government, will transform the retail sector in the country, while the rest of the voters felt the opposite. As per some retail industry insiders, the impact of the opening up of the sector to foreign investment will be felt in the retail sector in the long run (3 to 5 years).
Consequences and controversy
According to Rajiv Chawla, president of Faridabad Small Industry Association, the reasons for the resistance towards FDI in retail are purely political. Some of his arguments in favour of the move include:
·         No country can afford to take on an isolationist approach.
·         Large retail is inevitable
·         Prices stabilise because of investments in Cold-Storages
·         The people of India come first, including those who want a superior product or service buying or selling experience, and at the end of the day it is the money they have will decide where they go.
·         Farmers & primary producers get much better prices and long term purchase contracts, like Vendors to Auto OEMs.
·         It can act as great opportunity to sell our products to the global markets
There are however several arguments against single brand retail with some quarters protesting the entry of the international players in the sector. Government officials said that to avoid controversy and further opposition in regarding the passing of the single brand retail policy, it would be introduced with certain riders to protect the domestic retailers. According to Prof A Ramaswamy Iyengar, faculty-retail, Welingkar Institute of Management Research and Development explains, “There would certainly be advantages and disadvantages of allowing 100% FDI in single brand retail. The effect of the policy will be understood only with time.”
While the controversy rages on, it is clear from the present scenario that while multi-brand retail may take some more time to garner consensus, single brand retail seems all set to become open to FDI soon.

Tias Chakraborty

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