Panel Discussion on FDI in Retail: Implications on MSME
Bureau of Research for Industry and Economic Fundamentals (BRIEF) and Indian Council for Research on International Economic Relations (ICRIER) organized a panel discussion on ‘FDI in Retail: Implications on MSMEs’ on Friday, 21st of December, 2012 at India International Center Annexe , New Delhi. The aim of this discussion was to understand the implications and impacts allowance of FDI retailing will have on some of the smallest stakeholders of our economy: Micro, Small and Medium Enterprises (MSMEs).
Dr. Rajat Kathuria, Director and Chief Executive at Indian Council for Research on International Economic Relation, opened the session by highlighting how FDI in Retail will evolve in India and contribute to GDP and employment. “In a calibrated approach China and Brazil have done exceedingly well in the retail sector post FDI. If the same approach is applied for bringing FDI in Retail to India it can have a positive impact on the Indian economy as well” Mr Kathuria stated.
The conference was attended by eminent scholars and researchers which included Mr. Rajat Kathuria, Dr. Arpita Mukherjee (Professor at ICRIER), Ms. Shilpa Gupta (Head of Retail and FMCG division of FICCI), Mr. Sriram Khanna (Professor at the Faculty Of Commerce and Business at Delhi School Of Economics), Mr. Anil Bhardwaj (Secretary General Of Federation of Indian Micro and Small and Medium Enterprises).
The Panel Discussion, chaired By Mohammed Saqib, CEO of BRIEF, saw rich dialogue and exchange of ideas among the esteemed panelists on issues relating to generation of revenue, employment and the exchange of technical knowledge between domestic and foreign retailers. The debate centered around how FDI in retail sector will evolve, its impacts on MSME sector, consumers, employment and GDP of the economy.
Dr. Arpita Mukherjee said Indian market lacks marketing knowledge, innovative capability, and access to global market and feels if FDI in retail sector is introduced; all these problems can be resolved. However, she suggested the need for a regulator and National MSME policy to overlook the functioning of the retail sector and ensure sourcing of 30% goods from MSME sector.
Sri Ram Khanna, Professor at Faculty of Commerce and Business at the Delhi School of Economics, explained how FDI in retail would lead to a decline in price at retail level. For consumers, this will be a boon but the retailers, on the other hand, will face greater competition and will have to work harder to maintain sales in the face of competition. There will be no threat to their existence in the short run but impact will show over medium and long run. In order to protect the MSME sector, a series of steps such as need to provide sourcing of MSME owned brands; friendly excise and VAT rules etc. were suggested by him.
Ms. Shilpa Gupta was in agreement with Mr. Khanna and added that FDI in retail will lead to accountability and traceability but additional investment in capacity building is required.
Mr. Anil Bhardwaj said that FDI in retail is not required to provide goods at a lower price. He stated that if Goods and Services Tax (GST) is approved then it shall serve the same purpose, however he agreed with the idea of introducing FDI in certain states to see its effects in the medium run.
In conclusion while some feel that this economic reform is a great step forward, others are not as optimistic. Only after it is implemented can we determine that whether the benefits are more than the issues or the issues are more than the benefits