Extolling the efficiency and competency of Indian retail firms; Professor Piyush Kumar Sinha of IIMA (Indian Institute of Management, Ahmedabad) sheds some light on the discreet aspects of widely expected FDI in organised multi-brand retail in India and its effects on Indian retailers.
In an interview with Rakesh Neelakandan of Commodity Online, he is upbeat on the prospects of Indian retail firms even as he adds, “We have to evolve a lot, not just in terms of hardware but humanware, before we can think of a large scale adoption (of models by Indian retailers).”
Sinha has been the Chairperson of the Centre for Retailing at IIMA and is a faculty in the area of marketing and retailing. He teaches Retailing and Marketing Management to post graduate students and also offers courses on Marketing Management and Consumer Behaviour to the Ph.D. students.
Excerpts:
Commodity Online: What are the possible M&A scenarios that you see once FDI in multi brand retailing is allowed for?
Piyush Kumar Sinha: Retail industry, like many others, has seen consolidation. These are part of an industry phenomenon and retail is no exception. India has a unique distinction of its largest marketcap companies operating in the retail sector. I would not be surprised that many foreign retailers may be worried that they may be bought over by Indian retailers as most of these large Indian retailers are already global in their business operations.
CO: There is the relationship aspect connected with the so-called kirana-stores (mom-and-pop stores) when it comes to customers, that make them virtually invincible. Will it be possible for Wal-Mart to replicate the model? (Starbucks has done that, although in a different arena.) Is a coupling of ideas possible that would work out for India?
PKS: We must understand that small store have not been obliterated and would never be. The reason is simple. Their business model is very different from a large format store. Even a developed country like Japan is full of small stores. It would be difficult for retailers like Wal-Mart to replicate the small store model.
CO: Regarding the not-so-affluent middleclass: They may shy away from the Wal-Mart ambience, given its relative flamboyance. Will firms like Wal-Mart have to tone down their ambience in India?
PKS: There is no need to tone down anything for the fear of customer shying away. Retailers like Hariyali Kisan Stores, Chaupal Sagar and Aadhar have demonstrated this even in the rural areas customers are ready to adopt new levels of service deliveries.
CO: Is there any marked difference in the functioning of India based retail chains when compared to chains like Wal-Mart when it comes to sourcing and other activities?
PKS: Indian retailers are trying to adopt models similar to those practiced by retailers like Wal-Mart and Tesco. Their business is dependent on efficiencies that require attention to details. We have to evolve a lot, not just in terms of hardware but humanware, before we can think of a large scale adoption.
CO: Briefly, what ripple effects (in terms of sourcing, employment...all the way to CSR) do you expect when stores like Wal-Mart enter India by virtue of FDI?
PKS: The effects (are) already being seen. The response of kiranas and improvements of service levels in the industry across towns and segments are indicative of this.Why do we forget that these retailers are already present in the country. The current FDI policy change would only enhance their stake. They have been sourcing since long. The whole area of supply chain (logistics, warehousing, transport, wholesaling) have been open since long. But we have not received the response from foreign investors so far.
CO: Could you please tell us about the technology that is employed in this kind of business? Will the entry of these foreign retail chains help Indian IT industry with orders for customised solutions?
PKS: Indian retailers already using the best-in-class technologies. In some cases, they are ahead of their foreign counterparts.
CO: What are the likely challenges that firms like Walmart would face once they enter India? How could they be tackled? What would be their challenges in real-estate sector and setting up of allied infrastructure?
PKS: Everyone is hoping for the best. But, if you notice, the real estate industry did not have to wait for foreign retailers. Indian retailers themselves have enough money for this purpose.
CO: Given that local knowledge is mandatory for these global chains, how would they gather the same in India? What could be the possible challenges?
PKS: That only a few retailers are truly global in their business proves this point. It requires a huge effort. You may note that in many emerging economies, local retailers are bigger than the MNCs.
CO: Regarding man-power requirement and skill development: Can we expect a Wal-Mart Training Centre?
PKS: Some retailers are already in this process.
CO: How deep do these firms have to engage farmers? How will they reach them, and more importantly, communicate and ultimately convince?
PKS: Please check out if, in other countries, it has been the retailers or some other entities who have agglomerated from the farmers on behalf of retailers.
As published in: http://www.commodityonline.com/news/FDI-in-retail-Prospects-of-Indian-retailers-taking-over-foreign-41820-3-1.html
Showing posts with label Retail. Show all posts
Showing posts with label Retail. Show all posts
Tuesday, August 23, 2011
Saturday, August 20, 2011
‘FDI in organised multi brand retail: India not yet ready'
When it comes to the latest CoS (Committee of Secretaries) suggested riders for FDI in organised multi-brand retail, the said conditions are not India-ready, feels Martin Patrick, economist based out of Kochi.
A retired professor from Kochi’s Maharajas College; Martin has been researching the issue for past three years and has written extensively on the subject.
“It can be a risky situation if FDI is allowed for with the current riders. Generally, the food market is closely connected to ordinary people. The government ought to have strengthened small-medium scale contract farming system and should have empowered farmer co-operatives before allowing for the FDI. The farmers are least organised.” he said, adding “especially the farmers that produce perishables.”
This also means India is not yet ready for the FDI.
The government is working to evolve a political consensus, which has not worked out well, he feels.
“Other than that, the government should have tried to strengthen the farmers from an economic perspective as well.” he added.
“It has not happened.” he said. “There is an element of democratic malfunction in all these.”
Also, there is a profusion of small/ medium-scale farmers in India. If they are unable to provide these retail chains produce at stipulated standards (which may be too high for them, given their resource limitations), there could be a situation where these poor farmers are de-listed from the sourcing list of these retail chains, Martin feels.
“If there were farmer co-operatives, the farmers who would have sidelined could have sold their produce to these co-operatives.” Martin added.
Employment loss
It is a given that when the retail chains open stores, many of those kirana (neighbourhood) stores would shut shop and many of those employed there would be thrown to the mercy of winds. It is also a fact that once the retail chains open stores, many new job opportunities would be generated.
So, will not the job losses be offset?
Martin provides a few statistics: He says:
There are about 35 towns in India with population exceeding 1 million. There are at least 4, 32,000 people employed in these towns in India in small-scale to medium-scale shops. With the entry of big chains, many of them will lose jobs.
Staggering enough, there are about 14 million kirana-shops in India employing 1.5 people on an average which are mostly family owned and family operated. The chains, once they expand, would hurt the employment status of these people as well.
He also invites attention to the past experiences in FDI in manufacturing segment backfiring. “The firms which were allowed FDI opted for full-fledged mechanisation thereby trimming jobs.” He said.
“In general, I expect farmers to be exploited more”, he said.
“There are no statistics to state that employment opportunities have enhanced when past experiences in FDI in retail in other countries are taken into account.” He said.
Inflation cannot be checked
“When these retail chains enter the market, they sell products initially at a low price, which they would later on increase. But people would continue to flock to these chains, as convenience matter to them.” Martin said, adding “It is more of a psychological effect.”
“The point is that inflation cannot be checked as consumers would still have to bear the cost.” He pointed out.
“My own observation is that 20-25% of people who shunned the kirana-stores, with the foray of Indian retail firms into the markets, have returned to the surviving shops.” He said.
Additionally, when foreign retailers enter the cities, real-estate prices would benefit. But, in future, when they reach the rural and sub-urban centres, price escalation in these areas may create problems, Martin feels.
Future hazy
“Standardisation in farmer produce and subsequent de –listing of non-compliant farmers could enrage the farmer community.” Martin added.
“We still do not know how the farmers would react to such a situation.” Martin concluded.
As published in: http://www.commodityonline.com/news/%E2%80%98FDI-in-organised-multi-brand-retail-India-not-yet-ready-41764-3-1.html
A retired professor from Kochi’s Maharajas College; Martin has been researching the issue for past three years and has written extensively on the subject.
“It can be a risky situation if FDI is allowed for with the current riders. Generally, the food market is closely connected to ordinary people. The government ought to have strengthened small-medium scale contract farming system and should have empowered farmer co-operatives before allowing for the FDI. The farmers are least organised.” he said, adding “especially the farmers that produce perishables.”
This also means India is not yet ready for the FDI.
The government is working to evolve a political consensus, which has not worked out well, he feels.
“Other than that, the government should have tried to strengthen the farmers from an economic perspective as well.” he added.
“It has not happened.” he said. “There is an element of democratic malfunction in all these.”
Also, there is a profusion of small/ medium-scale farmers in India. If they are unable to provide these retail chains produce at stipulated standards (which may be too high for them, given their resource limitations), there could be a situation where these poor farmers are de-listed from the sourcing list of these retail chains, Martin feels.
“If there were farmer co-operatives, the farmers who would have sidelined could have sold their produce to these co-operatives.” Martin added.
Employment loss
It is a given that when the retail chains open stores, many of those kirana (neighbourhood) stores would shut shop and many of those employed there would be thrown to the mercy of winds. It is also a fact that once the retail chains open stores, many new job opportunities would be generated.
So, will not the job losses be offset?
Martin provides a few statistics: He says:
There are about 35 towns in India with population exceeding 1 million. There are at least 4, 32,000 people employed in these towns in India in small-scale to medium-scale shops. With the entry of big chains, many of them will lose jobs.
Staggering enough, there are about 14 million kirana-shops in India employing 1.5 people on an average which are mostly family owned and family operated. The chains, once they expand, would hurt the employment status of these people as well.
He also invites attention to the past experiences in FDI in manufacturing segment backfiring. “The firms which were allowed FDI opted for full-fledged mechanisation thereby trimming jobs.” He said.
“In general, I expect farmers to be exploited more”, he said.
“There are no statistics to state that employment opportunities have enhanced when past experiences in FDI in retail in other countries are taken into account.” He said.
Inflation cannot be checked
“When these retail chains enter the market, they sell products initially at a low price, which they would later on increase. But people would continue to flock to these chains, as convenience matter to them.” Martin said, adding “It is more of a psychological effect.”
“The point is that inflation cannot be checked as consumers would still have to bear the cost.” He pointed out.
“My own observation is that 20-25% of people who shunned the kirana-stores, with the foray of Indian retail firms into the markets, have returned to the surviving shops.” He said.
Additionally, when foreign retailers enter the cities, real-estate prices would benefit. But, in future, when they reach the rural and sub-urban centres, price escalation in these areas may create problems, Martin feels.
Future hazy
“Standardisation in farmer produce and subsequent de –listing of non-compliant farmers could enrage the farmer community.” Martin added.
“We still do not know how the farmers would react to such a situation.” Martin concluded.
As published in: http://www.commodityonline.com/news/%E2%80%98FDI-in-organised-multi-brand-retail-India-not-yet-ready-41764-3-1.html
Tuesday, July 26, 2011
Impact of FDI in multi-brand retail on Indian commodity markets
We are very close to it; yet we can be very far.
FDI (Foreign Direct Investment) in organised multi brand retail is a hotly debated topic in India and the industry is closely watching the events unfolding. The Committee of Secretaries, a panel of bureaucrats have recommended ushering in FDI in the segment though with certain riders:
The investor concerned should be investing at least $100mn.The format should be allowed to come up only in cities with population figures are at 1 million. This would mean only 36 large cities would currently be entitled for shop formats.
The recommendation, as such, is not a sure sign of FDI having been allowed. The Union Cabinet should now approve of the same. Nevertheless, it is an indication of the government sentiments pertaining to the matter.
The business logic behind FDI
Significant local knowledge is necessary to do business in India, irrespective of sectors.
India, given its diversity and resultant multiple tastes, warrants flexible business models that cater to a multitude of needs and wants. So, foreign players may need this local knowledge in abundance, especially to penetrate Indian multi-brand retail markets.
On the other hand, there are challenges in merchandising, supply chain and technology that Indian players face, when it comes to multi-brand retailing, as told by Thomas Varghese, CEO of Aditya Birla Retail.
This is a theoretical framework that would facilitate a win-win partnership; where both partners can learn from each other and create value.
The logic is sound from a business man’s point of view. But is it the same when the topic is approached from many other angles through many other eyes?
How margin-free markets can take a beating
One of the widely perceived and publicised benefits that come with allowing FDI in multi-brand retail is that it would arrest the sky-rocketing inflation.
“This may not be the case...”, points out Martin Patrick, an economist.
“The past experiences show that once the organised players come in, prices have not come down.” He said.
However he pointed out something interesting:
It may not be the so-called kirana-stores (you regular grocer cum stockist of all that you need) that would be negatively affected by the advent of these big players. It would also be the stores which employ 4-5 people, the so-called margin-free markets that would be affected.
Currently, these stores cater to a growing middle class; the stores may not be looking flamboyant or air-conditioned. But they cater to a rapidly surging middle-class whose members are being eyed by the big players.
“The kirana stores always have their place in the map; all because they have a space. They don’t survive because of the scale but for their location.” Patrick pointed out.
The so-called medium-type stores survive because of scale and they can hardly match the scale and price as offered by the biggies.
“There is also the case of these big players passing on the initial cost of setting up the supply-chain to customers.” added Sunil Sakthidharan, Delhi based economist.
Additional rider
Martin Patrick also suggested an additional rider be attached to the current norms. But it requires some additional home-work to be done, in his parlance.
“The government can allow for the big player stores to be in the newly developed urban centres where there is a concentration of new-generation families whose tastes match with the modern outlook and elite class living. This requires some additional studies.” Patrick said.
“Already, there have been a number of studies being carried out in this regard. The fine-tuning of the same would help you formulate a better policy.” He contended.
Such a measure can soften the negative impact which would otherwise create trouble for small players, he feels.
Impact on mandis and commodity markets
Generally, the big players that source produce directly from farmers categorise the same according to their parameters and would off take the superior grade and re-direct the lower grade produce to mandis.
This reduces the quality of produce as made available in the mandis and would also Lead to a price-crash there, past experiences tell.
“Generally, the big players would enter into forward contracts with farmers and when a crop failure occurs, farmers would be at a loss.” Martin Patrick said.
“Given the scale they command, the big players may even find it profitable to source from abroad and the sudden spate of imports would deluge the farmers here.” Patrick argued.
The futures market can see a wave of speculation in agri-commodities, as these players may enter the arena with their deep pockets.
“This can bring further volatility in agri-commodities.” Martin Patrick concluded.
As published in: http://www.commodityonline.com/news/Impact-of-FDI-in-multi-brand-retail-on-Indian-commodity-markets-41081-3-1.html
FDI (Foreign Direct Investment) in organised multi brand retail is a hotly debated topic in India and the industry is closely watching the events unfolding. The Committee of Secretaries, a panel of bureaucrats have recommended ushering in FDI in the segment though with certain riders:
The investor concerned should be investing at least $100mn.The format should be allowed to come up only in cities with population figures are at 1 million. This would mean only 36 large cities would currently be entitled for shop formats.
The recommendation, as such, is not a sure sign of FDI having been allowed. The Union Cabinet should now approve of the same. Nevertheless, it is an indication of the government sentiments pertaining to the matter.
The business logic behind FDI
Significant local knowledge is necessary to do business in India, irrespective of sectors.
India, given its diversity and resultant multiple tastes, warrants flexible business models that cater to a multitude of needs and wants. So, foreign players may need this local knowledge in abundance, especially to penetrate Indian multi-brand retail markets.
On the other hand, there are challenges in merchandising, supply chain and technology that Indian players face, when it comes to multi-brand retailing, as told by Thomas Varghese, CEO of Aditya Birla Retail.
This is a theoretical framework that would facilitate a win-win partnership; where both partners can learn from each other and create value.
The logic is sound from a business man’s point of view. But is it the same when the topic is approached from many other angles through many other eyes?
How margin-free markets can take a beating
One of the widely perceived and publicised benefits that come with allowing FDI in multi-brand retail is that it would arrest the sky-rocketing inflation.
“This may not be the case...”, points out Martin Patrick, an economist.
“The past experiences show that once the organised players come in, prices have not come down.” He said.
However he pointed out something interesting:
It may not be the so-called kirana-stores (you regular grocer cum stockist of all that you need) that would be negatively affected by the advent of these big players. It would also be the stores which employ 4-5 people, the so-called margin-free markets that would be affected.
Currently, these stores cater to a growing middle class; the stores may not be looking flamboyant or air-conditioned. But they cater to a rapidly surging middle-class whose members are being eyed by the big players.
“The kirana stores always have their place in the map; all because they have a space. They don’t survive because of the scale but for their location.” Patrick pointed out.
The so-called medium-type stores survive because of scale and they can hardly match the scale and price as offered by the biggies.
“There is also the case of these big players passing on the initial cost of setting up the supply-chain to customers.” added Sunil Sakthidharan, Delhi based economist.
Additional rider
Martin Patrick also suggested an additional rider be attached to the current norms. But it requires some additional home-work to be done, in his parlance.
“The government can allow for the big player stores to be in the newly developed urban centres where there is a concentration of new-generation families whose tastes match with the modern outlook and elite class living. This requires some additional studies.” Patrick said.
“Already, there have been a number of studies being carried out in this regard. The fine-tuning of the same would help you formulate a better policy.” He contended.
Such a measure can soften the negative impact which would otherwise create trouble for small players, he feels.
Impact on mandis and commodity markets
Generally, the big players that source produce directly from farmers categorise the same according to their parameters and would off take the superior grade and re-direct the lower grade produce to mandis.
This reduces the quality of produce as made available in the mandis and would also Lead to a price-crash there, past experiences tell.
“Generally, the big players would enter into forward contracts with farmers and when a crop failure occurs, farmers would be at a loss.” Martin Patrick said.
“Given the scale they command, the big players may even find it profitable to source from abroad and the sudden spate of imports would deluge the farmers here.” Patrick argued.
The futures market can see a wave of speculation in agri-commodities, as these players may enter the arena with their deep pockets.
“This can bring further volatility in agri-commodities.” Martin Patrick concluded.
As published in: http://www.commodityonline.com/news/Impact-of-FDI-in-multi-brand-retail-on-Indian-commodity-markets-41081-3-1.html
Sunday, February 20, 2011
Is FDI in retail akin to opening up the Indian agri-sector?
Foreign Direct Investment (FDI) in organised multi-brand retailing may have many points in its favour:
1. Organised retailing would benefit farmers by giving them better prices
2. Organised retailing would benefit consumers by giving them best rates
3. Organised retailing would help in infrastructure development in the form of logistic support and warehouses.
4. Organised retailing can tame inflation
No wonder, there has been demand from various sides to permit FDI in organised multi-brand retailing.
But let’s consider this fact: Organised retailing is facing severe restrictions in developed countries to prevent retailers from monopolising the trade:
An excerpt from a 2008 ICRIER study “Impact of Organized Retailing on the Unorganized Sector”, says:
“It is interesting to note that regulatory restrictions on the growth in modern retail is more stringent in developed rather than in developing countries.
For example, in most West European countries, setting up of hypermarkets has become very difficult since the late 1990s and early 2000s as governments became alive to the demands of traditional small retailers and non-mobile consumers in these countries.
Merger and acquisition plans are now looked at more critically by the national and European competition authorities. While in most countries opening hours are liberalized including holiday trading, the very small number of countries where opening on Sundays are prohibited include developed countries such as Germany and Austria.”
Another excerpt from a 2005 study carried out together by IFPRI, SIWI, IWMI, IUCN has something to add:
“The small producer generally does not have the capacity to deliver the volume of food items that the large supermarket chains demand. Nor are they able to meet the quality standards and other requirements that are a common condition in the wholesale trade, especially in branded items.
Moreover, some supermarket chains and food processing industries operate on a global basis. In the report “Power Hungry” that was presented in Porto Allegro in January 2005 figures are presented which illustrate the enourmous concentration of food processing, trade and markets for inputs in food production, to a few corporations.
For instance, six companies control about 75% of the world trade in cereals, three companies take care of 85% of the trade in tea. As part of the new situation, local producers have to compete with food producers elsewhere. Variations in subsidies and other support, within and between countries, systematically place the small and poorly organised food producers at a disadvantage.”
Sticking the pieces together, FDI in organised multi-brand retailing can be instrumental in spelling doom to farmers and also to over 12 crore kirana shops in the country.
If FDI is allowed for in the business of organised multi-brand retailing, it would invariably result in two or more global companies calling shots.
The companies, in a bid to assume profitability, would opt for backward integration, wherein they would buy agriculture produce directly from farmers. And that means farmers, unless they are able to give the best prices, would be sidelined. Remember, Indian farmers, despite being protected from corporate agriculture and FDI in agriculture, will have to compete with technologically advanced farmers from developed countries.
Is this not akin to a situation where agriculture is opened-up for foreign players?
And the poor farmers, in a bid to stay afloat, may opt for credit, and buy high-yielding seeds and pesticides and would toil more in the fields. (Just as Mexican farmers did: Raj Patel; “Stuffed and Starved”)
Very often, the credit would be disbursed by these very retail chains, given the difficulty farmers have in procuring credit.
And mortgaging comes in!
If the crops fail, farmers would invariably have to sell their lands to these very retailers to whom they used to sell their produce.
Remember, when the crops fail, it would affect all the farmers in a vast area of land and swathes of territory would come under the control of these retailers who have opted for backward integration.
Subsequently, the farmers would be offered jobs in these agriculture fields which they once owned, as a part of corporate agriculture.
Given the fact that they only know the failed art of agriculture, the farmers would opt for the ‘agriculture jobs’ as acquiring new skill sets and migrating to cities would not be feasible for them.
In short this business of organised retailing would lead to farmers getting alienated from their own land.
Parting words
Of course, I have written the analysis on the assumption that many factors remain the same.
A farmer uprising, exerting pressure on the policy community as one of these events unfold, which in turn may prompt for a regulatory frame work (just as we are already having in developed countries) has not been factored in.
The point is: prevention is better than cure. Allowing FDI in retail should be widely debated. And if allowed, should come with necessary policy rigidity.
Backward integration should not be at the cost of farmers getting alienated from their lands and importantly, should not place the farming community under the risk of getting swallowed by foreign competition.
As published in: http://www.commodityonline.com/news/Is-FDI-in-retail-akin-to-opening-up-the-Indian-agri-sector-36450-3-1.html
1. Organised retailing would benefit farmers by giving them better prices
2. Organised retailing would benefit consumers by giving them best rates
3. Organised retailing would help in infrastructure development in the form of logistic support and warehouses.
4. Organised retailing can tame inflation
No wonder, there has been demand from various sides to permit FDI in organised multi-brand retailing.
But let’s consider this fact: Organised retailing is facing severe restrictions in developed countries to prevent retailers from monopolising the trade:
An excerpt from a 2008 ICRIER study “Impact of Organized Retailing on the Unorganized Sector”, says:
“It is interesting to note that regulatory restrictions on the growth in modern retail is more stringent in developed rather than in developing countries.
For example, in most West European countries, setting up of hypermarkets has become very difficult since the late 1990s and early 2000s as governments became alive to the demands of traditional small retailers and non-mobile consumers in these countries.
Merger and acquisition plans are now looked at more critically by the national and European competition authorities. While in most countries opening hours are liberalized including holiday trading, the very small number of countries where opening on Sundays are prohibited include developed countries such as Germany and Austria.”
Another excerpt from a 2005 study carried out together by IFPRI, SIWI, IWMI, IUCN has something to add:
“The small producer generally does not have the capacity to deliver the volume of food items that the large supermarket chains demand. Nor are they able to meet the quality standards and other requirements that are a common condition in the wholesale trade, especially in branded items.
Moreover, some supermarket chains and food processing industries operate on a global basis. In the report “Power Hungry” that was presented in Porto Allegro in January 2005 figures are presented which illustrate the enourmous concentration of food processing, trade and markets for inputs in food production, to a few corporations.
For instance, six companies control about 75% of the world trade in cereals, three companies take care of 85% of the trade in tea. As part of the new situation, local producers have to compete with food producers elsewhere. Variations in subsidies and other support, within and between countries, systematically place the small and poorly organised food producers at a disadvantage.”
Sticking the pieces together, FDI in organised multi-brand retailing can be instrumental in spelling doom to farmers and also to over 12 crore kirana shops in the country.
If FDI is allowed for in the business of organised multi-brand retailing, it would invariably result in two or more global companies calling shots.
The companies, in a bid to assume profitability, would opt for backward integration, wherein they would buy agriculture produce directly from farmers. And that means farmers, unless they are able to give the best prices, would be sidelined. Remember, Indian farmers, despite being protected from corporate agriculture and FDI in agriculture, will have to compete with technologically advanced farmers from developed countries.
Is this not akin to a situation where agriculture is opened-up for foreign players?
And the poor farmers, in a bid to stay afloat, may opt for credit, and buy high-yielding seeds and pesticides and would toil more in the fields. (Just as Mexican farmers did: Raj Patel; “Stuffed and Starved”)
Very often, the credit would be disbursed by these very retail chains, given the difficulty farmers have in procuring credit.
And mortgaging comes in!
If the crops fail, farmers would invariably have to sell their lands to these very retailers to whom they used to sell their produce.
Remember, when the crops fail, it would affect all the farmers in a vast area of land and swathes of territory would come under the control of these retailers who have opted for backward integration.
Subsequently, the farmers would be offered jobs in these agriculture fields which they once owned, as a part of corporate agriculture.
Given the fact that they only know the failed art of agriculture, the farmers would opt for the ‘agriculture jobs’ as acquiring new skill sets and migrating to cities would not be feasible for them.
In short this business of organised retailing would lead to farmers getting alienated from their own land.
Parting words
Of course, I have written the analysis on the assumption that many factors remain the same.
A farmer uprising, exerting pressure on the policy community as one of these events unfold, which in turn may prompt for a regulatory frame work (just as we are already having in developed countries) has not been factored in.
The point is: prevention is better than cure. Allowing FDI in retail should be widely debated. And if allowed, should come with necessary policy rigidity.
Backward integration should not be at the cost of farmers getting alienated from their lands and importantly, should not place the farming community under the risk of getting swallowed by foreign competition.
As published in: http://www.commodityonline.com/news/Is-FDI-in-retail-akin-to-opening-up-the-Indian-agri-sector-36450-3-1.html
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