Right from the day, the Department of Industrial Policy and Promotion (DIPP) released the Discussion Paper on Multi-Brand Retail in late June of 2010, Belgaum Chamber of Commerce & Industry (BCCI) has been opposing the proposal. In its well documented position paper, submitted to DIPP, BCCI along with FKCCI gave many reasons for opposing this move. The main contention is that this move would cause tremendous discomfort to large number of unorganized small scale retailers by making them jobless. The BCCI’s argument is that this move would lead to “huge unemployment in the Indian unorganized retail markets.
BCCI questioned the stand that the FDI in this sector would help the farmers in getting a reasonable return for their products and that this would also help in bettering the supply-chain and the back-end infrastructure. BCCI also brought to the notice of the Government that it has never seriously monitored the betterment of supply-chain nor the back-end infrastructure, when the domestic corporate sector is allowed in a big way into multi-brand retailing.
In this context, BCCI also mentioned the fact that the farmers in USA and EU are surviving more because of huge subsidies, as high as US $75 billion in the case of USA alone that their respective governments provide, and not because of the better price they are getting from Walmart and other MNCs.
It is also a fact that the pressure to allow in FDI in multi-brand retail gained stream after the US President Mr Obama’s visit to India. His visit was not all that fruitful to us. His main thrust, during this visit was to get market access to the US Farm products. As reported vividly, he was successful in persuading the Indian Government to open its market for the US farm/agri products through this FDI in retail route.
Despite all opposition from major trade organizations and cross section of people, it is unfortunate that the cabinet has agreed to allow 51% FDI in multi-brand retail with certain conditions like: a). The investment should be a minimum of US$ million, b). 50% of this US $ 100 million to be invested in back-end infrastructure). It would be allowed in cities with minimum population of 1 million people, and d) 30% of the products to be sourced MSE sectors, with a raider that this will be applicable to MSEs which have a total investment in plant & machinery not exceeding US $ 1.00 million.
When the condition that 30% of the material would be sourced from MSE sector, everybody thought that it would be from Indian MSEs. But, the background material to the cabinet note, that was released by DIPP shatters this myth totally. The note says “ 30% sourcing is to be done from micro and small enterprises which can be done from anywhere in the world and is not India specific.”
About creation of more employment, the background material says “Industry estimates suggest employment of one person per 350-400 sq.ft of retail space, about 1.5 million jobs will be created in the front-end alone in the next 5 years. Assuming that 10% extra people are required for the back-end, the direct employment generated by the organized retail sector in India over the coming 5 years will be close to 1.7 million jobs. Indirect employment generated on the supply chain to feed this retail business will add millions of jobs.
This is yet another myth that was floated to sustain their argument to allow FDI in multi-brand retail. In a rather strange argument, the advisers of Government are advocating that allowing FDI in multi-brand retail would bring down inflation. Contradicting this advocacy, the Government itself, through the Finance Minister informed the Parliament that the consistent high inflation is due to high global food prices. If that is the position it is beyond the reach of the common perception as to how FDI would bring down inflation. These MNCs would rather import much higher inflation rather than bringing it down.
The Belgaum Chamber of Commerce & Industries, Belgaum continues to oppose FDI in the multi-brand retail and appeals the Government of Karnataka not to allow FDI in multi-brand at any stage.
Instead, they urge both the Central and State Governments to help the unorganized retail sector to reorganize themselves with appropriate technology and financial support.