FDI In Retail - SC upholds Centre's policy

Today, 1-May-2013, SC has announced its decision upholding Centre's policy to permit 51% FDI in multi-brand retail sector and dismissed the petition challenging the FDI policy.

Who is for multi-brand retail?

• Big multi-brand retail players from around the globe have been eyeing the huge, lucrative potential in retail in India.
• The Government of India has been wanting to open the doors for the multi-brand retail to the multinationals. Centre has its eyes on the huge foreign exchange that is expected to flow in. 

Who is against multi-brand retail?

• The existing retail market players - especially the small mom-n-pop stores spread across the nation.
• The opposition parties.

Critics have been alleging that the advent of large multi-brand retail stores will be a huge setback to the mom-n-pop stores of India. A few decades ago, when there were not enough jobs for the citizens, the Government of India had promoted self-employment in a large way and given birth to so many small retail outlets across the length and breadth of the country - small shops managed by the family hence also referred to as the mom-n-pop stores.

Critics have feared that these small independent shops will not be able to cope up with the resources and financial power of the huge multinational multi-brand retailers and may be forced to close down - leading to large scale joblessness.

Brushing aside all these worries, in September 2012, the Government announced that it would allow FDI in multi-brand retail in India and this decision was subsequently ratified in the parliament in December 2012. Today on 1st May 2013, the Supreme Court has quashed the petition against FDI in multi-brand retail.

One Step More for FDI in Retail

FDI in Retail, an issue that has been center-stage in Indian politics for some time now. The government has been trying hard to see it through, even though not many are in its favor.

On Wednesday (05-Dec-2012), Lok Sabha voted on the matter and the saw it sail through. The nation witnessed discussions in which even allies of the ruling UPA coalition strongly spoke against it, but when it came down to actual voting members of Mulayam's Samajwadi Party (SP) and Mayawati's Bahujan Samajwadi Party (BSP) walked out.

The walkout by these two parties was a clear helping hand to the government which would have otherwise certainly been humiliated. Also, it was apparent that the walk-out was more political that topical.

Now, the next step and most probably the last big hurdle for this government would be getting it through in the Rajya Sabha.

FDI in Retail Sector

The way things have turned out on 27-Nov-2012, it seems that the ruling UPA government may finally get the numbers it requires to see its decision on FDI in Retail go through.

One of the allies of the UPA government party, the DMK has announced said that although it does not endorse the idea of FDI in retail it will vote with the government if the need so arises on this issue.

This announcement has changed the entire mood on the issue. A hot issue that seemed to be ready to embarrass the government has suddenly fizzled out. Following the DMK's announcement even the government has conceded to allow discussion in parliament under section 184, which allows for voting.

The stock markets also read positively into this development and stocks related to the retail sector jumped impressively.

What will be the fate of FDI in retail in India?

Today, Winter Session of the Parliament has begun and alonwith with it the final countdown has also started for the fate of the UPA government's bold decision to permit FDI in retail in India.

During the last few weeks, even the parties that supporting the UPA government - either from inside or from outside - have on several occasions voiced their dissent to the government's decision to allow FDI in the retail sector.
The Manmohan Singh led government has been trying at all steps to build consensus over the issue, but as it seems it has not been very successful. An apparently scared government has accepted to a discussion in parliament without voting on FDI.

This Winter Session is going to decide not only the fate of the FDI policy of the UPA government but also the every existence of the government. Mamta Banerjee's Trinamool Congress has already moved a no-confidence motion in the parliament.

Update:

Mamta's Trinamool Congress did call for a no-confidence motion, but it was not allowed because the party could not muster the required numbers.

Time for mom-n-pop stores to get their act together

One thing is clear, the big boys of retail from the west, like WalMart and other similar players. are going to set shop in India.

These big guys have all the resources required to motivate the governments to act in their favor. They are big, they are organized and most of all they see great potential setting up shop in India.

I am finally convinced that all the parties opposing FDI may at the most delay it for some more time, but they cannot and will not be able do much to stop it. In fact, the ruling coalition government at the center has given the green signal to FDI in multi-brand retail. It has taken a firm step and has shown a strong political will in announcing this decision.

So what next?

I think it is time for the local mom-n-pop stores to get their act together. They are faced with a huge challenge of combating competition from these big boys.

The first thing to do is take a deep breath and evaluate the situation. Do a SWOT analysis. Understand the strength, weakness, opportunity and threat faced by both parties, i.e. the small stores and the big guys.

Everyone needs to seriously get to work and start getting the act together. This means that they will have to reorganize their stores to create an atmosphere worthy of their customers. In the current regime, almost all these mom-n-pop stores have a very similar look and feel. Some have started already upgrading but they still have a long way to go.

The biggest thing in favor of the mom-n-dad stores is the direct one-to-one relationship that they have with their customers. This needs to be further consolidated. It must be strengthened with campaigns and strategies that will encourage and reward customer loyalty.

• computerization, 
• reorganizing displays, 
• incentives and discounts for loyalty
• air-conditioning - if possilbe

are some ways of ensuring that there customer base remains secure.