The Retail stocks at the census early Monday morning went for a toss. The stocks were surging when the United Progressive Alliance (UPA) announced allowing 51 per cent Foreign Direct Investment (FDI) in the retail sector. Later the stocks dropped a little when the opposition resisted the move. It was worse today when the markets opened may be the reaction to the West Bengal Chief Minister Mamata Banerjee quoting Finance Minister Pranab Mukherjee, said that the government has decided to suspend its decision on the Foreign Direct Investment or FDI in multi-brand retail.
The new policy, seen as one of the most important government economic reforms in years, may commit supermarkets to strict local sourcing requirements and minimum investment levels aimed at protecting jobs. Yet a lot of the world giants showed interest in the venture to tap the world’s second largest consumer market.
Top circles now doubt the UPA’s dedication to move forward in this direction. The political deadlock forced the government to re-think its strategy.
Meanwhile Over 90 per cent of consumers said FDI in retail will bring down prices and offer a wider choice of goods. Responses of over 2,000 people (500 each) covering farmers, consumers, kirana store and traders across ten major cities like Delhi, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, Ahmedabad, Pune, Chandigarh and Lucknow were gathered earlier this week by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).
Nearly 78 per cent of farmers too said they will get the right price from multi-format stores with the number of intermediaries being cut. Fruits and vegetables currently pass through five layers of greedy middlemen and each adds a margin, leading to substantial difference in farm gate prices, wholesale prices and what the consumers ultimately pay at the retail store.
But the small and medium retailers are opposing the move fuelled by the oppositions. The welcome of FDI means low cost, better markets to farmers, quality goods and ofcourse death of the traditional Kirana business. But the Prime Minister Manmohan is hopeful that everything will go in the right direction.
