FDI to boost image of India’s retail sector; May turn into a reality check for Indian brands

FDI fishbone?

A surprising take-home from this morning’s press conference at the HT Leadership Summit 2011, were the tongue-n-cheek remarks by our very own ‘man with a plan’ – Montek Singh Ahluwalia. Regarding the current political hoopla surrounding retail FDI in India, he felt the opposition’s negative reaction “is bogus and politically motivated”.

Ahluwalia, who rarely speaks on political issues, was surprised with the BJP’s standpoint when it came to FDI and their claims that ‘the move’ would adversely affect small time retailers and farmers. “If that’s the case”, he mentioned last week, “We should not have taxis and should have allowed only cycle rickshaws to run in our country”. In fact, with foreign brands entering the market and the removal of the much hyped middleman, farmers stand to benefit greatly.

The plan panel deputy chairperson also said modernisation was important considering increasing demand especially in perishable goods such a meat, fish, vegetables and fruits, where there is lot of waste as India lacks cold storage facilities.  “Indian retailers will have to upgrade themselves and improve if they want to stay competitive in the market. Opposition to FDI is opposition to growth and anti-competitive behaviour”, echoed CEIBS Vice President and Dean John Quelch, also speaking at the event.

Pitting international brands with Indian companies will ensure an improvement in service quality, price and variety to the end consumer. “If Reliance and Biyani are thinking of opening up a store in Thailand, they will first need to test themselves against international brands. FDI in retail will give them that unique opportunity”, said Ahluwalia. Who then went on further to advise the opposition to let Parliament run; where pros and cons of the issue can be debated in detail and not to seek an adjournment motion at the drop of a hat. “Seeking a vote on every issue is contrary to Parliamentary precedent,” he said.

While economists across the board have supported FDI in multi-brand retail, the opposition is still not convinced – threatening to burn down Wal-Mart if it made an appearance.

For more on FDI in retail refer to John Elliot’s blog post – Wal-Mart & Co fuel Indian political crisis

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