“FDI in retail will kick-start the ailing Indian economy”
“It will have a positive effect on Indian business & infrastructure development,” says Manish Behl, Business Head – Food, Sahara Q Shop
The decision of Government of India to allow 51 per cent FDI (Foreign Direct Investment) in multi-brand retail sector is expected to open up the economy in a big way. There have been various debates and deliberations around it by both, retailers and marketers. A recent player who will be soon giving a concrete shape to its retail ambition is Sahara India.
In early August 2012, Sahara India announced an initial investment of Rs 3,000 crore to open 800 Sahara Q Shops in 60 cities and towns across five states – Bihar, Jharkhand, Rajasthan, Uttar Pradesh and Uttarakhand – that will sell food and grocery items.
In conversation with exchange4media, Manish Behl, Business Head – Food, Sahara Q Shop talks about what the FDI announcement means for the nation, marketers, retailers and consumers.
On the announcement of increase in FDI cap in multi-brand retail…
Opportunities are like a sunrise – If you wait too long, you miss them. Any serious foreign retail player who intends to invest in Indian retail market would surely take advantage of FDI opportunity. In fact many serious global players have already invested in Indian market by some way or other and have been waiting for a relaxed investment economic environment.
Indian retail market size is a mammoth with over 1.1 billion population and most international retailers want a share of the pie of this spending burgeoning populace. Many players will jump in the deep waters and few may be fence sitters. Past experience of Indian policies related investment in power sector, 2G, infra sector have not been encouraging and sometimes been arbitrary. Current infrastructural bottlenecks, unfriendly business policies, licenses and regulatory environment, unstructured economic policies, rampant corruption and above all state government’s non supportive attitude will also play an important factor in decision-making for foreign players.
The government’s decision on FDI in multi-brand retail will surely have a long-term positive effect on the Indian business and infrastructure development. It will not only create opportunities for foreign players but will also give boost to various sectors in India.
Apart from kick-starting the ailing Indian economy, FDI will provide an opportunity for Indian consumers to experience world-class services and products. For years consumers in India have been forced to old technology and outdated products, for instance, in the 80s all cars were only Fiat and Ambassadors before Maruti Suzuki and other multinational automobiles showed their mettle to us.
Government bill on FDI is always challenged whenever it is tabled in the Parliament. A lot of foreign players are eagerly waiting for opportunity to tap one of the world largest and ready markets.
On the opportunities for marketers and retailers…
With over 90 percent market share of unorganised sector in retail and as the second largest employer in the country, it is highly misplaced that by allowing FDI in multi-brand retail, it will erode the employment of small retailers. In fact the market size is so large that no single player can tap all the resources. Small retailers are an important element in India and would play an important role in re-defining the modern retail business.
Indian retailers and marketers will also benefit by the expansion in infrastructure, manufacturing and availability of various FMCG, processed food and staples and health care products, thereby leading us towards a developed retail market. Any international retailer would be required to upgrade the current farm production, supplier base, wholesale, processing and procurement infrastructure to optimise the availability, quality and cost efficiency. This would lead to development of more and more SMEs in the country, which are extremely important for country like ours.
Quality manpower resources would be required to harness these large opportunities in small and medium manufacturing set-up, infra development and retailing activities. Exchange of technical and trade best practices and processes will help enhance quality of manpower and help manage quality manufacturing and retailing operations in various big and small cities of India.
On the challenges that will arise for Indian retailers…
The major challenge in front of Indian large format retailers would be upgradation of their current operations and bring it at par with global standards and improvement in current production capacities. To be competitive, Indian retailers will have to upgrade themselves by better management of current facilities, robust supply chain management, higher investments in cutting-edge technology, greater direct procurements, and removal of middle man and intermediaries to optimise operations and cost. Deep pockets, organised approach and global market learnings would give foreign retailers edge over domestic players to be more cost effective in sourcing and development of all resources.
On what this means for Sahara Q shop…
Q Shop model is very unique and novel; we are creating and developing manufacturing tie-up to upgrade the production facilities and bring them to international quality standards. Same way we don’t want to disturb the current fabric of kiryana and small time retailers, hence, we are strengthening and supporting them by providing quality merchandise at reasonable cost which till now was only available to large format stores. Q Shop has a deep reach in rural, B and C class towns of India, so we have no issues with foreign investors investing in multi-brand retails.
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