Create awareness about beneficial effects of FDI in retail: ASSOCHAM
28.11.2011 (UNI) ASSOCHAM today welcomed the Cabinet’s decision to allow 51 per cent Foreign Direct Investment (FDI) in multi-brand retail, but said the government needs to spread awareness among people that the move will not result in huge job losses and small stores will not be impacted negatively in a major way.
Existing shops in cities and rural areas have several advantages such as knowledge of customer requirements, willingness to give credit and ability to deliver goods at the doorstep.
‘Foreign Investments will bring in more competition and efficiencies, create lakhs of new jobs and reduce the price gap at levels of farm gate, wholesale and retail,’ The Associated Chambers of Commerce and Industry of India (ASSOCHAM) said.
It said the government has factored in several key conditions for 100 per cent FDI in single-brand retail and 51 per cent in multi-brand retail.
For instance, half of the investments have to be made in developing back-end infrastructure like cold chains and refrigerated trucks.
An ASSOCHAM release said agriculture sector needs to find ways to reduce wastage from farm production and improve efficiencies of its highly-fragmented food supply chain. More than 30 per cent of agricultural produce is spoilt before it reaches consumers.
The government has also said that 30 per cent of goods will need to be sourced from small and medium enterprises. ‘This will bring a large number of them into the organised sector and tune several businesses with best global practices.’ The release said it is important to note that rural India is set to witness an economic boom with per capita income having grown by 50 per cent over the past ten years, mainly on account of rising commodity prices and improved productivity.
FDI in the retail sector will result in mushrooming of large outlets with different sales formats and generating new job opportunities in services sector as well.
It said though some middlemen may be affected in the short-term, supply side constraints will be removed and consumers will benefit as inflation eventually comes down.
ASSOCHAM said the government’s move is pro-active, well timed and prudent as farm sector reforms are urgently required. ‘Early apprehensions about the loss of livelihood haunted the adoption of computers and information technology in our system for over a decade. But once IT was adopted, the benefits to common man have been overwhelming,’ ASSOCHAM said.
It is of the view that the size of emerging retail market in India will have space for both small traders and large retail shops as urban population expands from less than 25 per cent to 50 per cent or over 500 million in the next two decades. UNI