Column : Attitude, not FDI in retail, will bring reforms

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SL Rao:  Nov 22 2012, 01:14 IST
No one seems to object to FDI in single-brand retail (Ikea, Louis Vuitton, etc). But many object to FDI in multi-brand retail. The obtuse commerce minister has confused everyone by linking FDI in multi-brand retail to better agricultural development. Its principal achievement is to enable large retail chains to negotiate better prices for manufactured goods. The traditional small retailers who will be hurt will be those located near these stores. Now the commerce minister proposes another regulator to ensure fair competition between the old and new retailers. He has forgotten the existence of the Competition Commission of India (CCI).

Packaged manufactured consumer products are branded, but not fresh products like fruits and vegetables. For consumers to get lower prices for fresh fruits and vegetables, a total transformation of agricultural and rural infrastructure is required. No private retail chain, and that too a foreign one, is going to do this. Multi-brand retail is about selling branded packaged products, almost invariably manufactured, to strict standards so that every brand offers the same product.

Other fresh products like breads, cakes, pastries, etc, are also sold in such stores. They are usually unbranded, but sometimes have brand names (Britannia, Modern, etc). Fruits and vegetables might be sorted for quality and pre-packed but are not branded. They are placed at the far end of the store so that the customer has to pass the shelves of packaged products, and might be tempted on impulse to buy them.

Manufacturers of packaged goods are happy to have large retail chains

... contd.

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