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Published On:12 December 2011
Posted by Indian Muslim Observer

Display of Idiocy: FDI

By Nabeel A. Khan

Of late FDI can more aptly be expanded into Frantic Display of Idiocy rather than Foreign Direct Investment. Though, I don't have much understanding of economics but the business which I started as a 12-year-old school going village boy certainly makes me love FDI (100 percent -single brand and 51 percent-multi brand) in retail industry. I started my tiny venture with Rs 2.5 and sustained till my wish while being in competition with the mammoth (In respect to the size of my business) Kirana wala (un-organized grocery seller) having a turnover of at least Rs 1000 a day.
 
Looking at the miniature capital, I had to choose the most suitable product for my potential customers. My first customers were my siblings and cousins, aged between 7 and 14 years. So the best product option available for me was toffee, in those days Maha-lacto chocolate was very popular amongst us. I finally decided- this is the product I want to sell. With my total capital investment of Rs 2.5, I bought 200 grams of this chocolate. I sold them in retail @ 25 paisa a piece, the same price at which the other Kirana walas (neighborhood shops ) were selling. I earned a profit of 50 paisa and then total available money was Rs 3. I further bought the same quantity of the chocolate after selling them and adding the profit in the capital, I had increased my capital and added another products-biscuit cigarette (cigarette was bought by my father which was even then injurious to health :)). And finally added new products egg and mixture the total value of my business had reached over Rs 2000, that too in less than a month.

My successful venture of Rs 2.5 despite the competition from neighborhood kiranawala having a daily turnover over of Rs 1000 gives me really strength to question the cacophony created against the foreign players entering into the retail space in the country. Getting back to my entrepreneurial stint I think what kept me ahead was no expenditure in furniture. Whereas the neighborhood shopkeeper had to invest a substantial amount on it. Another edge I had was the convenience provided to the customers. My customers got all the desired products, with the satisfaction of check and feel within a walk of few steps. Relying on my own case study I would say that The distance and geography is very important. For one or two small things no will drive five km when the price of fuel is already skyrocketing. So the neighborhoods shop can never die.

It's not for the first time the so called well-wishers of farmers and mom and pop shop owners are creating ruckus against the organized players coming into retail business. Just few years ago, when Reliance Fresh stated off many of the politicians forcefully locked the outlets and routinely came on the street to oppose the move. Just after few years we see the situation. Reliance Fresh was opened in many cities. In Delhi, Jamia Nagar-Sarita Vihar area, where I stay, we had at least three outlets of Reliance Fresh but unfortunately, only one could survive and similar fate was meted to Sabka Bazar and Subhiksha. But so far I have hardly seen a small neighborhood shop being shut, rather I have seen them getting fatter and fatter every day.

Being from a farmer family, I understand the criticality of the situation in all aspects. We have not been better off when it comes to government policies for procurement of food grains and other farm produces. The prices offered to the farmers are far below than the actual price in the market. At times the prices of essential commodities like-pulse, onion, and sugar reach to unbelievably highest limits but farmers had never got any benefit from it.

It is obvious that the price escalation is not caused by the organized retailers. The traditional traders across the country deliberately hoard the commodities to fuel the price escalation and earn higher profits. Yet another vital issue is the quality of the products which every now a then poses serious question against these local traders. The real gainer so far is not the actual farmers but the middle man and traders. Any goods have to pass through at least four to five middlemen before reaching to the dining table of the consumers. We cannot assert that we will be able to completely remove the middlemen with the foreign players coming in but it will certainly be minimized.

The other fundamental argument I would give is the lack of infrastructure. We have critical shortage of storage capacity. Almost 30 percent of produce go wastage every year. It doesn't matter how good we become in terms of increase in procurement of the grains, but until we don't have a proper storage we cannot deliver them to our citizen at affordable prices. The proposed FDI will certainly help in improving the infrastructure as one of the vital clauses of the bill talks about the mandatory 50 percent of the total investment going into infrastructure related work. It is also important to note that the farmers will be in better bargaining position with more and more players coming in; they will be given desirable revenue for the contract farming as well.

However, it's not a flash dispute but a well anticipated. Any change will first attract criticism. It's the duty of the government to be prepared to face it and implement what is good for the country with full conviction rather than succumbing to the fear of losing the majority on the floor of the Houses. It was government's failure not to be able to convince the country about the vitality of the bill and pushing the hold button on it. The similar concern over the sovereignty of the country was raised when the de-licensing was implemented in the country. But since then- from a debased indebted economy we have metamorphosed into the world's one of the fastest growing economy. The emotional outburst like another East India company waiting to happen is utterly childish. We need to understand that India is not same as that of early 19th century. Today's India is independent, united, and young. Anyone who wants to move ahead cannot ignore the importance of Asia's third largest economy. Going by this theory of blunt jingoism- the other countries should also ban the fast growing Indian Inc from acquiring companies in their countries but this is not the case.
 
I agree that we cannot only look at rosy side only. Many have feared that once these foreign players once establish themselves they will be dictating their terms. My answer is that any at point of time the farmers will never be bound under any law or rule to remain loyal to these people. If not give right treatment they can anytime shift their relation to the small shop owners.

[Nabeel A. Khan is Senior Correspondent, Auto Monitor (Infomedia18). He can be contacted at nabeelkhan786@gmail.com]

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Posted by Indian Muslim Observer on December 12, 2011. Filed under , , , . You can follow any responses to this entry through the RSS 2.0. Feel free to leave a response

By Indian Muslim Observer on December 12, 2011. Filed under , , , . Follow any responses to the RSS 2.0. Leave a response

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