The Indian Economy Blog

January 24, 2006

FDI in Single-Brand Retail

Filed under: Business — Reuben Abraham @ 10:09 pm

A friend of mine in Delhi informed me this morning that the Cabinet has just approved 51% FDI in single-brand retail. What this means is that you can soon buy Coach handbags and Manolo shoes in India, but Wal-Mart will have to wait. I have looked for independent confirmation of this, but have come up with nothing. If any of you have more information, please do leave a comment. I think this is very significant news and could mean that FDI in multi-brand retail is just a matter of time.

UPDATE: The Indian Express has confirmed this (and The Financial Times). The decision was made a day or so in advance of the WEF summit in Davos. It all makes sense now :)

14 Comments »

  1. Hindustan times confirmed it here http://www.hindustantimes.com/news/181_1607345,0002.htm

    Comment by Deepu — January 24, 2006 @ 11:42 pm

  2. While this is a significant step in India’s retail policy ,i dont think multi-brand FDI will be coming in the next 2-3 yrs. FDI is increased in several other sectors also. While this is a welcome step, we shall have to see how Left will react.

    Also FDI in single-brand wont bring much investments into India. Already most of the famous brands including Apple is operating in india through franchise root. So i couldnt see how this opening up of FDI will attract them to invest more money in india. However we can definetely expect brands like Starbucks and IKEA chipping into India in the near future.

    Comment by Deepu — January 25, 2006 @ 12:05 am

  3. You Guys are happy and you feel FDI in retail business is auguring well. But those already in retail business are worrying. They even said that left are the only party doing good for this country.

    Even big players like food world, Big Bazar etal are opposing the move to allow FDI in retail business. Not required to mention about small scale investor. Already there were couple of suicides of Small scale retail traders happened in cities like chennai, Bangalore because of these Indian big players. What happens if Wallmart like big whales getting in to the indian retail ocean.

    Comment by Bonapert — January 25, 2006 @ 5:18 pm

  4. Bonapert,
    Haven’t we seen this movie before? Every time ANY sector in India is opened up, there’s always talk of the smaller guys getting screwed, suicides etc. Eventually, when it turns out that the consumer benefits greatly from competition (telecom, civil aviation being prime examples) and/or we figure that the existing Indian competitor can compete pretty fiercely, the script gets rewritten to focus on some other sector instead. I remember in the early 90′s, even worthies from the so-called “Bombay Club” used to oppose liberalization, but they’re now in the forefront of calling for more sectors to be opened up.

    As for the big players opposing FDI in retail, what do you expect them to do instead? Welcome competition? No, they want to protect their turf for as long as possible! And while we’re at it, how come you don’t oppose Big Bazaar and all the large Indian retail firms? Don’t they drive the small guy out of business as well, following your logic? Or is it okay to chase the small retailer out of business as long as it’s an Indian who owns the business?

    Comment by Reuben Abraham — January 25, 2006 @ 9:49 pm

  5. For Bonapert & others…

    Not only have we seen this movie before, but we’ve seen this very same action sequence earlier… on IEB.
    Check out http://indianeconomy.org/2005/12/14/tilling-fields/

    A comment from Puneet Saxena went thus

    “When large retail houses like Walmart arrive, they will under cut prices drastically. This will lead to decay and eventually death of these small stores. With them will go the livelihood of millions.”

    My response:

    1) There’s a billion plus consumers in India.

    2) And the lowered prices, which you seem to abhor, would help them all tremendously…. in a poor nation, the more value for money that I can get, the better.

    3) Because of 1) and 2), the livelhood of hundreds of millions is improved.

    Is there any part of this logic that you don’t agree with?

    Comment by Prashant Kothari — January 25, 2006 @ 10:56 pm

  6. Bonapert makes the same old argument. In the name of helping the poor, the argument of protectionists is always about protecting businesses (ie producers) from competition and not for consumers and low prices. It’s a strange phenomenon that occurs everywhere and doesn’t seem to go away.

    Comment by Chandra — January 26, 2006 @ 12:54 am

  7. Bonapert..

    Umm, what exactly is your point, and how is it connected to the blog post?

    Not sure if I get it… assuming there’s one, of course…;-)

    Comment by Prashant Kothari — January 30, 2006 @ 9:04 pm

  8. Bonapert, (while I am not sure I want to get into this) how are all the issues that you raise – some very real (especially about rural poverty) and some the same old Ms. Roy’s conspiracy nonsense – are improved/changed by allowing mostly middle class Indians (I would think) choice on where they want to shop? Trashing middle class around since the 60s for three decades, in the name of socialism, did not seem alleviate any of the issues you raise.

    Comment by Chandra — January 31, 2006 @ 9:15 pm

  9. Bonapert

    If you have any comments to make directly related to the post, please do so. Other off-topic posts will be deleted.

    Comment by admin — February 1, 2006 @ 5:11 pm

  10. Ok, I have had to delete a bunch of absolute trash from Bonapert. I am not banning Bonapert yet, but I will if s/he posts anymore trash on here.

    Please, folks, keep your comments to the point. One good thing about this blog is the generally excellent quality of commenters. Please don’t ruin it. You can criticize posts all you want, but keep it civil and keep it to the point.

    Comment by Reuben Abraham — February 3, 2006 @ 11:19 am

  11. pl see articles on FDI on following site:

    Comment by br — February 11, 2006 @ 12:45 pm

  12. CAN anybody help me understand what “SiNGLE BRAND RETAILING” is all about ????

    Comment by anoyno.... — December 5, 2006 @ 11:33 pm

  13. well this was the way when the british came in to india earlier and made the whole indians as their slaves. now the history may repeat, look at the strategy of the foriegn investors…. they put marginally huge amount of money and attract the consumers with impractical(not for them)discounts in the begining which obviously make the small scale business men loose their business. after a certain amount of time, they (foriegn companies)acquire the monoply. yes all this may appear as an “unneccessary fear ” to the common man or a typical consumer now, but that is what going to be happened. and remember there are no morew “gandhis” in this country to fight for the selfish and irresponsible people.

    Comment by adithya — November 3, 2007 @ 9:19 pm

  14. one of the commentators says there are million of consumers who will be benifitted by the lowered(??) prices. but my dear citizens of india that will not last for a very long time but till there is no competition to the foriegn companies and thereafter the market will be in their controland let’s not forget the extent of corruption in the country. what can one do if they hyke the prices thereafter(as that is what they are going to do.) from that time, neither the small business man nor the consumer will be benifitted.

    Comment by adithya — November 3, 2007 @ 11:59 pm

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