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Belgaum Chamber of Commerce opposes FDI in the multi-brand retail

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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.

Members of BCCI giving the memorandum to the DC Anbukumar
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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.

Trinity Belagavi
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7 COMMENTS

  1. Well FDI with proper regulations is always good. Farmer should get his worth for his produce. It is always good that there are the least people/links between the producer & the consumer as the people involved in between hardly add any value to the product.

    Well as far as agri poducts are concerned we need good logistics, good refrigerated warehouses so that the fresh produce can be stored etc etc. Junk produces junk & to address all these issues we need governance which is honest & committed.

  2. Is that the customour know what product he is buying from retailor is he actualy get the same quality of product in mall, if he get same quality its very rare because large quantity sellors always get there product seperately manufactured for exmpl if you buy a buiscuit of any brand which is manufactured in mumbai unit is have diff quality of same product which is manufactured in hubli unit its makes diff in cost too so max retailor try to sail there product of good quality because customour have to visit there shop regualarly but shopping malls always attract customer by putting offers not by product quality All i say is if retailor shut his shop then it will affect also to the transport and other fields it will take nagative effect ” HAZARO KE THALI ME SE CHURAKAR EK KI TRESURE BHARNA ANYAY HOGA”

  3. 🙂 take examples of farmers.. they sell tomatoes at 50 paise per kilo to the wholesalers!!! the middleman.. sells it at 20 rupees, the retail goes to 25-30 rupees 🙂 I’ll end my conversation here 🙂

  4. Hundreds of thousands of Indians who earn their livelihood from the 12 million existing retail outlets will be put out of business by these giant Retailers. According to the non-government cult, FDI will drain out the country’s share of revenue to foreign countries which may cause negative impact on India’s overall economy. Many of the small business owners and workers from other functional areas may lose their jobs, as lot of people are into unorganized retail business such as small shops, Agents, distributors, logistics etc. The domestic organized retail sector is not competitive enough to tackle international players and might loose its market share.

    Just take an example of Garment industry. A production cost of a fabric say Jeans or a T-Shirt is hardly 100-150 bucks but these large retailer add their brand name and resell it at twice-thrice the price of original manufacturing cost. Be it the groceries, garment, electronic, food & beverages, cosmetics or anything you land-up paying more under the influence of glossy marketing strategies. Their strategy is simple; First bear the loss, capture market, get ride of small competitors (retailer) & when the ground is clear ‘They are the boss and you are left with no option’. Another trick, Make luxury a necessity, and then loot the customers. Example, Mobile services, cosmetics products etc.

    I am against the majority stake holding of capital by a foreign firm. I could rather suggest Govt to unite the unorganized sector and encourage them to develop a local “International” brand. As we did in IT & Software industry & it is not an impossible task. I feel Govt is bowing out to the pressure tactics of US & other European countries as they are unable to provide “MARKET” to their extra large entities. This could be due to over production, highly automation processes or economic slowdown. Their “large” scale production (economies of scale) and extensive use of technology is going to kill them as well as others.

    Growth & Development in ones life should be step by step. if some one tries to race against the time, accidents are BOUND to happen; sooner or later!!!!!

  5. FDI will change India’s picture!!! it will change everything.. the rates the inflation and everything, Right now we are a city, states with closed business, all qoute their own rates, let FDI come in, let middlemen know what is it doing business without them, all cheap goods, right from producers to consumers.. let there be competetion.. only then we’ll surge and rise. If anyone has visited “METRO” store in Bangalore.. its a bliss for middle class, you get the same things at below MRP , way much below.. why not!!! We’ll remain like this if we oppose FDI, We want to sell our goods to spain, germany.. we don’t want them to sell them their goods here or even the goods manufactured here? that isn’t a fair business 🙂 Every FDI store will have a procurement section from where it buys from farmers directly and sell it above it 10% higher.. now the middleman/agent cost of 50% is gone. it will make things cheaper. read read read.. visit places, read other economies, see whats good and whats not.. singapore is a 100% non producing nation in everything, everything comes from outside, still its the strongest economy in ASIA, though the whole country being smaller to Mumbai. this step from govt is only to kill inflation and extreme price rise, thats by eradicating middleman/agents, Talking about subsidies.. LOL we are a nation which gives subsides to everything.. from fuel to electricity, for farmers, they need it.. this FDI needs to come in. and come in full force. I SUPPORT FDI.

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