Friday, December 30, 2011: 12:47:29 PM

Retail Poll Feature

International retailers may bring down prices

In spite controversy surround FDI in retail, international retailers can bring about price reduction

The much debated and much publicised controversy surrounding foreign direct investment in retail may have died down in the last few weeks but some questions still remain in the mind of the common man. One of the biggest selling points of the policy for the present government was that the entry of international retailers would bring down the prices for the common man. If this idea was sold well enough there might have little or no resistance from some of the states where the matter assumed a very political colour.

 
For an economy that has fought an almost losing battle against inflation over the last few years, anything that can bring down prices is a welcome change. A recent survey by Retailing360 reiterated the fact that the common man believes that international retailers can help bring down prices.
 
One obvious consequence of FDI entry in retail is that there would be much more competition in the single brand space. Since the middleman (the Indian partner) is eliminated in the equation, these international players have the opportunity to sell at cheaper prices.
 
According to Rajiv Chawla, president of Faridabad Small Industries Association, “The payment processing and cash management as well as tax adherence part of retailing, both in terms of procurement and sale, are expected to be good if there is FDI in retail.”
 
Impact
 
While retailers can expect their businesses to get streamlined based on the international, the common man can also expect better quality products. Mumbai based engineer Sumit Mall says, “I expect the international retailers to first enter the urban market. If they can really bring down prices then their penetration is bound to increase. Inflation is a major problem today and it affects every consumer in the middle class and lower middle class segment.”
 
The question whether entry of foreign retailers through the single brand window would bring down prices for the common man still remains unanswered but the political colour and controversy surrounding the issue has ensured that foreign investors lose interest from the market. Once the 51% cap is removed, it will be interesting to see the number of parties still keen to take a bite from the soured Indian pie.
 
Tias Chakraborty

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