FDI IN RETAIL

with rising doubts about india's current economic health there is renewed speculation about fresh round of financial sector reforms. one of the key areas is the issue of foreign direct investment in multi brand retail. while it is clear that the government is keen to implement this to spur investment, opposition parties and several chief ministers continue to oppose this on fears that this will have an adverse impact on shopkeeper and kiran stores. if the government wants to implement this measures then it must address these fears.

As far as other countries are concerned Thailand and Malaysia has 100% in multi brand retail and researcher shows that introduction of western organized retail format has given traditional retailers and impetus  to spruce up their business model to become more competitive. In addition regulation in Thailand have succeeded in imposing modern ideas of hygiene and convenience among fresh food stall owners.

In Malaysia, FDI in retailing came with caveats like limited store opening hours in urban areas and limiting the number of hypermarket in urban areas. This resulted in investors being encouraged more towards investment opportunities in smaller urban areas.

The Indian government needs to draw from the positive examples of Thailand and Malaysia and other  developed markets to alleviate the fears surrounding foreign investment in retail development. The lesson from these emerging markets suggest that in India too successful implementation of retailing will require further regulatory intervention at local and stare levels. In other words regulators needs not to be caught between the conflicting goals of promoting trade competitiveness and economic efficiency on the one hand and defending the interest of small shopkeeper and kirana stores on the other.

Another lesson from the experience of other  emerging market is that retail development has occurred in multifarious ways in these countries. In Thailand transformative regulation as the name suggest have dramatically transformed the economy and have been instrumental in making it a shopping destination. In Malaysia FDI in retail has been more restrictive while trying to balance retail growth equitably across the urban and semi urban regions. The Indian government should convince states that they too can take different approaches to FDI entry- retailing as an agent of transformation of the state economy like in thailand or an agent of restrictive yet balanced economic development like in Malaysia.