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One of the most recent problems which had shaken the UPA government is decision of allowing 51% foreign direct investment (FDI) in multi brand retail sector. The government had suffered severe criticism from all sides on this decision because of the concern about the loss of livelihoods it is likely to create. Let us analyse what actually is FDI in multi brand retail and how is it likely to impact the Indian economy. Retailing means selling of goods to the end consumer for final consumption. The Indian retail sector is divided into two groups that is organised and unorganised sector. Organised retail sector includes trading activities of licensed retailers which are registered for sales tax, income tax etc. These retailers are publicity-traded supermarkets, corporate backed hypermarkets and also privately owned large retail businesses. Some examples in India include Big Bazaar, V Mart, Shopper's Stop etc. Unorganised retailing on the other hand consists of traditional retailing formats like local kirana shops, mandi, beedi/cigarette shops, fruit and vegetable vendors and alike. The share of the organised retailing sector in Indian retail setup is extremely low which is about only 10% and rest 90% of retailing is done by the unorganised sector which mostly employs family members and lack adequate storage and logistics facilities.
Though the current level of opposition which led to the holding back of the FDI in retail policy tends to generate a very negative public opinion towards this but the true picture as not as dark as it is shown. There are many flaws associated with the present retailing set up of unorganised sector which leaves the consumer with very little choice and poor quality goods. From a study it is found that about 30-40% of the farmer's produces gets destroyed because of lack cold storage and warehouse facility. The various riders attached by the government to the opening of multi brand retail in India is likely to take care of such problems. According to these conditions the establishing retail store must invest at least 50% of its total investment in developing back end infrastructure and facilities like modern product sourcing management, logistics, supply-chain management, cold storage,packing,transportation,sorting and processing, refrigeration etc.
- Vyom Bindal