Time travel with Rakesh kaul -Episode 8

New Horizons, New Hopes - FDI in Retail

The Government of India allows 100% FDI under its automated route for SBRT ( Single Brand). In the past, the FDI policy of Single Brand Retail Trading allowed only 49 % FDI under the automatic route and FDI beyond 49 % and up to 100% through the Government approval route. In 2012, the Indian government opened the MBRT sector to FDI, allowing foreign companies to own up to 51% of Indian retail ventures. There is an increasing clamour for FDI restrictions to be opened up totally across sectors.?

There are a whole host of advantages, if the momentum for FDI continues unabated, while there are a set of cons as well. Purely functionally, foreign investment brings in global practices in logistics, including the migration of many such processes to the organised sector. This will also enhance the time to market protocols as well as accuracy in pricing models. Quite like every other industrial model of development, this will help up the game for Indian back end manufacturers as well.?

This story of global best practices will surely extend to the hard core technology domain as well. Technologies such as Internet of Things, Artificial Intelligence, Machine Learning, Predictive Analysis, Virtual & Augmented Reality, etc. which were applied in scale in source countries will find smoother integration in the Indian eco system as well. Thus ensuring a leap in the learning curve for both customer facing as well as developmental technologies.?

Career opportunities, conforming to global protocols, will also become plainly visible for aspiring Indians. Once again, this will lead to a best-in-class talent pool bridging the gap with the developed world and other thought leaders in the global economy. This knowhow will travel seamlessly to India and can then be picked up by Indian industry at large, across multiple sectors.?

Besides, all of the above, cost reduction and other production efficiencies can very well come to the party as a result of FDI. From a pure play customer perspective, the Indian has for many decades been denied the best of the world, not just in terms of brands but in processes. This anomaly is being corrected to a large extent but a whole lot more can be done.?

More than 90% of India’s $500 billion Retail Market is driven by family businesses. Many, from the super large to the MSME sectors, will naturally feel insecure if the FDI policies are further relaxed. Folks fear the loss in business and also anticipate job losses as a result. Much of these fears are unfounded, for many reasons.?

The Indian economy, according to IMF estimates, will emerge as the world's third largest economy by 2027, hopping over Japan and Germany, as its GDP crosses US$5 trillion dollars. By 2047, India aspires to be a developed economy. Already, we enjoy an internet penetration of ever 50% with a rural base of 400 million, making us potentially the first 5G First mobile nation in the world. E Commerce Revenue is expected to show a compound annual growth rate (CAGR 2023-2027) of 5.4%, resulting in a projected market volume of US$108,060.8 million by 2027. With an expected increase of 22.6% in 2023, the Indian eCommerce market contributed to the worldwide growth rate of 8.7% in 2023.

In the context of the above, the appetite for consumption of the Indian customer is increasing by leaps and bounds. What will fuel this farther is the presence of world class brand experiences, possible through FDI. We anyways live in an outsourced world, with China being the factory of the world. Therefore, with an increased momentum of demand, Indian manufacturers are only slotted to gain, as consumer appetite will increase and an entire new generation of ‘upgrading’ consumers will come to the party. Nandan Nilekani’s Beckn Protocol, driving interoperability across E Commerce platforms is already? fuelling ONDC and will do a? whole lot more to inspire customer demand. New age hybrid models like D2C will further inspire Indian customers to succeed smarter and quicker.

In terms of people, while there will be a transfer of jobs to ‘overseas’ employers, structured HR and training will be the key bonus areas. Which, in turn, will surely lead to a higher standard of employee quality and thus, this culture will spread to Indian companies and also create the new generation of entrepreneurs. By now, we know that the global village is indeed a reality and momentum is the most desired factor.?

In sum, the benefits of FDI in retail, beyond a single brand, will aid the growth ambitions of our economy. Yes, we must have protective guardrails, especially from an employment and sustainability perspective, but in a new age progressive economy, the path forward is well and truly irreversible.?