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Thursday, April 24, 2014  

Retail FDI to help domestic firms
CHICAGO Although India has decided to put foreign direct investment (FDI) in multi-brand retail on hold, various experts feel that allowing foreign investments in this area will benefit domestic sectors more than the foreign players like Wal-Mart.

“In my opinion, allowing FDI in multi-brand retail would serve India very well by bringing in the culture of discount stores,” VG Narayanan, a ‘Thomas Casserly professor’ of Business Administration at the Harvard Business School, said. Narayan, who spent the last month in India, said with large international players entering the country’s retail sector, logistics and supply chain management practices will improve, which in turn, will benefit farmers and manufacturers and reduce waste.

“Multi-brand retailers such as Wal-Mart have played a very important role in keeping prices down, while delivering tremendous value to the customers. So, Indian consumers will benefit from lower prices,” he said. This will also create a large number of jobs, not just in the retail sector but also in logistics, construction and manufacturing as well, he said.

The Union Cabinet cleared the proposal to allow 100 per cent foreign direct investment (FDI) in single-brand retail and 51 per cent FDI in multi-brand retail in November last year.

Although, the proposal for single-brand was cleared by Parliament in the winter session, FDI in multi-brand retail was vehemently oppposed by all opposition parties, including ruling United Progressive Alliance (UPA) ally Trinamool Congress, after which the decision was put on hold by the government.

Wal-Mart has been neutral on the issue. “We respect the Indian government’s decision and look forward to a consensus being reached on FDI in multi-brand retail,” Megan Murphy, International Corporate Affairs Manager, said.

However, Lakshman Krishnamurthi, a ‘Montgomery Ward’ distinguished professor of Marketing at Northwestern University’s Kellogg School of Management, said success of allowing foreign retail in India depends “on how you measure success”.

“Wal-Mart entered China in 1996 and it took more than a decade for the China operations to become successful. India in 2012 is a richer country than China was in 1996, on a per capita GDP basis, but the income distribution is skewed with a significant bottom tail.

Press Trust of India
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