Excerpts from 'The Caravan Conversation' on FDI in retail

The Caravan conversation on 'Who's Afraid of Foreign Retail?' kick-started in the Cricket Club of India, Mumbai on 2 January 2012, with a comment from Vivek Dehejia, economist, Carleton University, who said that FDI (foreign direct investment) in retail could have been one major reform in 2011 if it were to address the deeper structural problems like issues related to labour market, productivity, education for everyone in the retail chain including the farmer, et al. He mentioned that it is difficult to defend this reform when it really isn't one. 

Echoed Meera Sanyal, chairperson, RBS (Royal Bank of Scotland), and said, "Just FDI in retail is not a reform unless it actually ensures that the farmer will get better price for his product." She added that there's a lot of waste in the system and what FDI can do is get the best technology to reduce the waste. "Let's get the ecosystem right, enterprise will find its way", she concluded.

Vikas Bajaj, South Asia correspondent, The New York Times, touched upon the APMC Act (Agri Product Marketing Commission) and mentioned how the lack of adequate cold storage facilities in India were somewhat responsible for food inflation last year. Addressing the fear of local shopkeepers' existence in the retail chain, he shared, "When Starbucks opened in USA, some local shops did get shut but it didn't decimate an entire culture of local shops."

Dehejia added that FDI in retail doesn't break the 'mandi' structure in India. So any retail giant will ultimately have to go to the vendors in a mandi. He mentioned that the reform has to be made more accessible since it is not going to be a panacea to fix the major problems of the system. "Right now, if FDI in retail brings in money to the system, it will only plug a few loopholes like a band-aid. It is fairly incomplete. It's a minor piece of reform meant to fix major problems", he expressed.

Throughout the discussion, the three conceded that land reform (lack of adequate cold storage facilities) would be one of the major issues this reform (FDI) shall face. Bajaj added that people who are likely to lose/suffer the most would be the wholesale traders.