Journal of Small Business and Enterprise - March, 2013 - CII

TransformationMulti-Stakeholder BenefitsFDI in multi-brand retail will indeedbenefit industry, producers, kiranamerchants, consumers, and the workforcein very many ways. A CII survey of industryleaders revealed that an overwhelmingmajority (80 percent) of the respondentswere in favour of FDI in multi-brandretail. They also recognised that aliberal FDI policy will greatly benefit theMSME sector.FDI in multi-brand retail will alsodrive industry to adopt more consumerorientedpractices including closemonitoring of consumer preferences.Consumers who do their purchases atmodern outlets have experienced betterproduct quality, lower prices, one-stopshopping, choice of more brands andproducts, better shopping experienceswith family and fresh stocks.Moreover, where safety is a key factor,consumers tend to opt for branded goodsthat are perceived as safe and conformingto government regulations. They are alsobetter protected against incidence offood adulteration.Organised retail with FDI participationwill help Government to systematicallyenforce the regulatory norms. Thereis greater transparency and ease ofmonitoring in the case of organised retail,which sets stringent standards that areexecuted through pre-defined processesand technology.CII's considered view is that MSMEproducers will greatly benefit from thesourcing opportunities that stem fromFDI participation in the sector. Accordingto a CII survey, FDI in retail will push upsourcing from MSMEs to $298 billion fromthe present value of $157 billion.FDI in retail will also help MSMEsin terms of gross sales, new orders /contracts and overall growth.Besides, a liberal FDI policy will usherin advanced technologies and expertisethereby augmenting the supply chainmanagement of recipient firms. CIImaintains that supply chain efficiencieswill help reduce wastage, such as seen infruits and vegetables production. This inturn will help government curb inflationand bring down the interest rates.FDI in multi-brand retail is expected toaugment the business prospects of some12 million kirana stores in the country.Merchants who are looking to scale upwill gain access to patience capital whichis relatively scarce in the country. Manymore brands and products entering theIndian market can be retailed at thekirana stores.The kirana merchants will also gaineasier access to credit and financefacilities, logistics support and modernsystems and processes that drive upefficiency levels. Pertinent to note thatmany of the new-generation kiranamerchants are already using technologieslike mobility, e-commerce and socialmedia to run their business and meetcustomer expectations.Moreover, according to a CII survey,nearly 70 percent of the employees inthe retail industry see FDI as a growthopportunity for them. They believe theemployment levels will rise with neworders coming in from around the world.FDI in retail is likely to encourage firms tohire more. Demand for contract labour toowill increase. So the notion about peoplelosing their jobs in the wake of FDI in retailis completely unfounded.Way ForwardKeeping in view the key benefitsthat FDI in multi-brand retail will likelydeliver, CII has recommended a set ofsteps and guidelines for seamless foreigninvestments in the sector. They are:Kirana stores can be organised intolarger cooperatives to make them moreattractive for investments.Encourage SMEs supplying to globalretail majors in India to focus upon thequality standards set by the majors, andhelp them gain deep understanding of thecomplex vendor management systems.Improve public and privateinfrastructure around multimodaltransport hubs, warehouses, distributioncenters, mismanaged supply chainswith cold-storage and other facilitiesdrive inefficiencies.Empower consumers throughawareness programmes, helping them setthe right expectations from all categoriesof brands and products.Bring about changes in legal normssuch as those on zoning, store sizes,opening hours, import taxes whichcan shape the emergence of retail andselect formats.Government and industry need to becognizant of the fact that FDI in retail cansometimes negatively impact consumers ifcorporate retailers adopt anti-competitivepractices such as predatory pricing. So,the Competition Act 2002 can be furtherstrengthened. Also protect consumersagainst predatory pricing.Simplify and streamline thelicensing and approval processes, createa single window clearance up to theextent feasible.Ensure uniform implementation ofupdated laws like APMC Act, etc.Update existing laws like Shops andEstablishment Act to make it audit basedor self reporting.The retail industry in India facesmultiple challenges in terms of scale,employability and shortage of relevantskills. Managing this challenge requiresthe Government to create recognizedcourses and industry wide accreditationsfor basic training for entry level employeeswith pre-defined quality standards;provide an impetus to Governmenteducational establishments to introduceretail programs and extend incentivesand support to retailers to create trainingbodies for development of employees.On a larger plane, organised retailindustry in India is expected to grow to$535 billion by 2013 with modern retail(organised retail) accounting for a 10percent share. Experts expect the industryto scale the $1,250-billion level by 2020.MSME Business March 201315