FDI in Retail, Reasons Why I should Care.

Note from Blogger: I am always surprised when some of my contemporaries don’t take notice of life beyond their jobs or their passions. You might believe in a movement or be stubborn about a cause, but if you’re ill informed then there is no substance to your efforts. Start reading, really reading, skip the photos on a webpage for a change and take in the content.

If you’ve been reading the Economic Times lately, you’ll have woken up to the fact that our government has made a decision on Foreign Direct Investment (in retail) in India. How does it effect you and what is it? While I am in no way an expert, and frankly a lot of it is alien to me, I wanted to get a basic grasp on it. Well that is the premise to this article, a lay-fashion-man’s view. You’ll be surprised how changes within our economy and government effect, let’s say the quality of products you are buying from non-Indian labels or just how fast stores will get the latest products.

WHAT is this FDI in retail?

The basics then, FDI stands for Foreign Direct Investment, in retail this means companies such as WalMart, Tesco, Carrefour etc can now open up their stores in our markets. But wait, don’t rejoice just yet, there are a lot of steps to be taken before these multi-brand shops become true locals.
In a nut shell: Let’s say your New Yorker aunt’s vintage sunglasses business wants comes to India. But to start, she has to first have a joint venture with you or she could choose to go for a franchise with your uncle. On top of that she can only sell out of states who have agreed to the FDI, of which, these cities have to have a 10 lakh population. Plus a hefty 50% of her FDI money must go to back-end infrastructure. As you can see I’m not explaining it in the best way possible and even if I were, the process is frustrating. Part of the reason why many investors are apprehensive to invest in the first place.

Getting into details about just how these juggernauts can enter the country is a whole different post. For now lets focus on the fact that this bill has been passed and we will soon see it’s effects.

Why do we care?

Well for one this approval in FDI retail means the following :

Single-brands like Ikea and Apple are amongst the many who will now find it easier to do business in India. Maybe, just maybe this will prompt brands like H&M to get to India, and for that we can all be thankful, am I right? Recently we’ve seen a huge influx of brands come into our markets (our malls), from SuperDry, Dune, Stuart Weitzman and our favourite beauty department store Sephora. Although unlike Idea and Apple, these a fore mentioned are here on the dreaded joint venture.
Multi-Brands like Walmart are also in the wait. Although, apart from the multitude of barriers they will face, they will HAVE to invest 50 per cent of their total FDI in back-end infrastructure. Which means, before products even hits the stores, there will be money put in to improve the fundamentals. Better manufacturing, distribution, quality control, packaging, storage – the list goes on. This is not all together a bad thing for small scale Indian businesses in the retail industry. Improvements of this kind, will not only help these big brands but will also push for standardization of procedures and processes from our smaller Indian suppliers. Improvement all around don’t you think?

In a nutshell: your favourite pair of shoes will reach you faster, they will be better quality, and along the way these heels would have helped get smaller businesses money to take part in this chain of supply. Helping the industry, helping the economy. But lets not end the article on a utopian note, there are a multitude of issues with the FDI in Retail and the dark underbelly of bribes, illegal licenses and all of that will eventually come to light. As a customer though, expect some changes in the way you shop.

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One response to “FDI in Retail, Reasons Why I should Care.

  1. Amruta

    Nice article Sue!

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