FDI in retail: Rajasthan likely to feel early effects

Times of India, September 17, 2012

Rajasthan is set to be in the forefront to feel the early ripple effects of the foreign retail giants if one looks at the profile of the nine states that have given consent for allowing foreign direct investment in multi-brand retail.

With Bharti-Walmart, Carrefour and Metro Cash & Carry already present in the wholesale segment in the state, Jaipur is expected to be among the first of the cities to see a multi-brand retail store by a global major.

“Jaipur has that visibility and would be very much on the radar of these companies as they begin to kick off their ventures in India,” said S G Vyas, the promoter of a textile company in the city.

Unlike in Delhi or Mumbai, a store in a city like Jaipur is likely to throw up multiple ramifications associated with the presence of these big multi-national retailers.

While the small kirana stores have learnt from the presence of domestic retailers that their businesses and services are unique and cannot be replaced by these foreign companies, the most affected are likely to be the middlemen. Moreover, with proper infrastructure, the wastage of farm produce will be curtailed to a large extent.

“Farmers will get a better price for their produce as these companies will source directly from them without the middleman’s help. Almost 40% of our produce is damaged due to lack of proper roads, transportation and storage facilities. These companies will invest in back-end as well. The overall impact will result in prices becoming cheaper for the consumer,” Pradeep S Mehta, secretary general, CUTS International.

The back-end facility can supply products at a cheaper rate than what a distributer, for example of a soap company, sells to a kirana store.

“These retailers have national tie-ups with the manufacturers and get products at cheaper rates than what the dealer gets. The distributor is likely to lose but the kirana store owner will gain,” said a manager of a leading retail chain in the city.

Experts in the sector said the retailers will need a strong workforce to man operations across the value chain and create huge opportunities. They said the presence of such stores will also attract good brands and give boost to the realty market which has hit a plateau.

Rahasthan has close to half a dozen cities with more than 10 lakh population where foreign retailers could open stores. Brands like Big Bazaar and Reliance Fresh already have a presence. But the impact so far has not affected the traditional businesses in any significant way. The experts; however, cautioned that Wal-Marts and Carrefours will make a difference as these companies will not depend on the mandis.

Initially, the domestic retailers had also planned operations basing on farm-to-form concept. But today, they too depend on the mandis.

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