|
FDI and 'Single Brand Retail'
There are neither philanthropist companies nor philanthropist investors; they are all
of the same kind, with the objective of making money be it for themselves,
or their owners and their shareholders, even though corporate social
responsibility has taken off in a big way. Thus it should be clear from the
beginning that if the FDI is to
come to India there will be an opportunity for them to make profits on their
investment and not for charity. Though the BJP and the left oppose it, the
UPA had the courage to talk of opening of the markets to Single brand retail
without cap. But the recent successes of the Left in the states of west
bengal and Kerala increase the bargaining strength of the 'FDI in single
brand' opposers.
advertisement
FDI is defined as the investment of foreign assets into the domestic
structures, equipment and the organization. The organized sector in the case
of retail would mean one in which there are more than 10 persons are
employed, unfortunately this accounts for only 2% of the entire retail
industry. The retail industry is divided into organised and unorganised
sectors. Organised retailing refers to trading activities undertaken by
licensed retailers, that is, those who are registered for sales tax, income
tax, etc basically involving the corporate-backed hypermarkets and retail
chains, and also the privately owned large retail businesses. Unorganised
retailing, on the other hand, refers to the traditional formats of the
retail industry involving example, the local kirana shops the corner stores,
owner manned general stores, paan/beedi shops, convenience stores, hand cart
and pavement vendors, etc. The latter involves a large majority of the
Indian populace that is involved in the retail industry.
The Indian companies are planning to hit the road as companies like
reliance have started investing money to the tune of around 30000 crores in
setting up shops, tying with other brand names and other ancillary features.
It is clear that they want a bite of the lucrative Indian retail pie and
obviously making huge profits in the bargain. In this context it may also be
correct to mention that there is buoyancy in the attitude of the Indian
players if not anything else in relation to taking on the foreign players in
the retail arena and are thus willing to take on the foreign competition by
its horns. Though there are a few people who advocate caution and are
satisfied with the present system of 'single brand retail' and the present
investment cap of 51% for the FDI.
India has not made formal WTO commitments nor has received reciprocal
market access by the other countries. Autonomous liberalization against our
obligations will only help in weakening our bargaining power in future
meetings of the trade body. It also highlights that the following measures
should also be taken.
- Reducing taxes in relation to trade and a revision in the internal
trade policy.
- Need to amend the Agricultural marketing committee
- A re-look at all the related regulations.
Introduction to the Retail Sector
There are two aspects which are always brought into consideration when
the talk is of affecting the present retail market in the country namely the
Foreign Players with the FDI and the Large Indian companies. A major
highlight of manufacturing is that it does not provide jobs for semi
qualified people. The aligned sectors to retailing like physical storage
etc. have the capability to. Change in consumer patterns and trends have to
be kept in mind with the consumers willing to spend and being desirous of a
good 'Shopping experience'. Also there is a need to keep in mind the lower
strata that will not be able to participate and thus be affected by the
reforms or investment in this sector unless proper steps are taken. It may
be put forward that there is no law that stops Indian majors from entering
the retail arena though there are restrictions relating to minimum capital
requirement and sourcing conditions.
SINGLE BRAND RETAIL
Single brand retail has for a few months been the buzz word in the retail
arena ever since the DIPP put forth the press note 3, in February. Though it
comes across as a weak move and a half hearted measure on the part of the
government to open up the FDI to foreign players and also to keep the left
pacified. The left have always been interested in this aspect of the
economy. The only aspect or weapon in the hands of the government in the
furtherance of this cause is to 'interpret' the terminology 'single brand'
properly and in the interests of the society. It may be noted that the
bigger shopping malls and the super markets have a dedicated client base due
to which there will not be an effective threat to the kiryana stores as
perceived by the left.
Conditions laid down under the press note 3, 2006 by DIPP for coming
under the purview of single brand retail:
- Should be a single brand
- Should be sold under the same brand internationally
- It would only cover products branded during manufacture
Procedure for obtaining license under the SINGLE BRAND regime:
- Application to be put forth to the secretariat for industrial
assistance.
- Indication of the product categories to be made, in which the
product are proposed to be sold under the single brand
- Additions in the above application would require a fresh
approval by the government.
- There is consideration by the FIPB.
- The government approval is required for the same.
Single Brand by its meaning would mean 'own label brands' are those which
are created and owned by businesses that operate in the distribution
channel. Actually the position of the meaning of this term is variable and
thus is ambiguous. The inclusion of the meaning of store brands, private
labels and branded during manufacture do not make the matter any easier. The
latter meaning that any foreign investment may not benefit suppliers of
locally produced labeled goods.
It may be proposed that there should be a standard set of rules that
would govern the administrative procedures which need not be referred to the
FIPB. The multistage approval system generally involves a lot of delays thus
upsetting the local consumer.
Conclusion
Though the government has good intentions there is criticism at all
quarters pertaining to the ambiguity regarding the express meanings of terms
like 'single brand'. Thus the government should take steps to remove these
aberrations and thus leave no scope of manipulation by unscrupulous money
mongers. The unorganized sector should be modernized and for that either the
organized sector should either gradually absorb the mainstream retailing by
the big players or the government. Moreover the government should be
evolving suitable policies so that the smaller players have a fighting
chance like availability of credit to introduce new technology and subsidies
to buy shop spaces etc which would help the growth prospects of the lower
strata for which the economic reforms are made. Economic reforms are made
for the economically downtrodden so it must be ensured that they have their
own advantages in the policies. One other thing that delights the mind is
the fact that a lot of corporate entities want to set up shop in India and
even the FIPB is taking interest as can be perceived by the rejection of
entry to some major retail players as their entry would not have a positive
effect on the Indian markets. This proactive role of the FIPB and the
government may propel the growth of the retail sector to India's advantage.
As of now allowing the FDI in the retail sector is out of question as the
left parties will take care of that. If at any later time FDI is introduced
in the retail sector due consideration and thought to the interests of the
people of India should be given and thus the drafted policies and protective
measures should highlight the same.
Contact: Tomu Francis
Army Institute of Law
tomu.francis@gmail.com
|
