FDI has been in the limelight for quite some time now. In a recent directive, the government has revised FDI in single brand retail from 51 per cent to 100 per cent. Even though clarity regarding the term ‘single brand’ is yet to be ensured but it intends that foreign companies would be able to sell their products which were sold internationally under a ‘single brand’. Does this benefit SMEs or is it a constraint?
The concept of ‘single brand’ implies that sale of goods of multiple brands, even by the same manufacturer, would not be allowed. In such an example, if Swatch obtains permission to retail its watches under the Swatch brand, it would not be allowed to retail any other brand such as Longines or Titan. The agency would have to seek separate permission and would need to operate separate outlets for it. This would mean a lot of SMEs that are playing in the retail and manufacturing sector.
Are We Being Too Ambitious?
The ‘single brand’ is an ambiguous term and the present policy does not clarify whether goods retailed with sub-brands under a major brand can be qualified as single-brand retailing. Single brand retail is expected to bring in a lot of investments from across the globe to India. On the other hand, it could slowly eliminate the existing domestic set-up due to a lack of implementation of the policy directives. India presently has a large number of SMEs, unorganized retailers who are an integral part of the retail. Ample care needs to be taken for their sustenance in case of 100 per cent FDI.
Big, Bigger, Biggest
Retail is a big phenomenon in India and one cannot simply participate in this process and mimic some settings from different context and expect it to work. On one level, many could perceive it as a threat of colonialism effected on a country which is familiar with its harmful effects. The biggest drawback remains in the lack of a level playing field for the domestic and small retailers which are still servicing a major part of the country.
The concept of ‘single brand’ implies that sale of goods of multiple brands, even by the same manufacturer, would not be allowed. In such an example, if Swatch obtains permission to retail its watches under the Swatch brand, it would not be allowed to retail any other brand such as Longines or Titan. The agency would have to seek separate permission and would need to operate separate outlets for it. This would mean a lot of SMEs that are playing in the retail and manufacturing sector.
Are We Being Too Ambitious?
The ‘single brand’ is an ambiguous term and the present policy does not clarify whether goods retailed with sub-brands under a major brand can be qualified as single-brand retailing. Single brand retail is expected to bring in a lot of investments from across the globe to India. On the other hand, it could slowly eliminate the existing domestic set-up due to a lack of implementation of the policy directives. India presently has a large number of SMEs, unorganized retailers who are an integral part of the retail. Ample care needs to be taken for their sustenance in case of 100 per cent FDI.
Big, Bigger, Biggest
Retail is a big phenomenon in India and one cannot simply participate in this process and mimic some settings from different context and expect it to work. On one level, many could perceive it as a threat of colonialism effected on a country which is familiar with its harmful effects. The biggest drawback remains in the lack of a level playing field for the domestic and small retailers which are still servicing a major part of the country.
The onset of large retail is imminent but the policy still needs to prioritise public good which is missing from the existing framework. Every Indian has the right to a better product and a better service but they are the final users which decide the success of such brands. The present policy needs to include quality directives which need to be adhered to by the foreign investors. Similarly, there is a lacuna in the labelling of ingredients and misleading marketing tactics which could harm the Indian population. The policy should include directives which are equal to both consumers from developed countries and developing countries such as India.
Single brand retail will give the Indian consumers access to foreign brands and it would also benefit the Indian economy as the money spent would be within Indian shores. Both foreign retailer and his Indian partner can benefit out of this system with the foreign investor getting acquainted with local market knowledge and the Indian partner learning best techniques in management, design and technological knowhow. Overall, with some corrective measures, this move could propel Indian economy to a new level. This presents a greater opportunity for SMEs to watch out for new liaisons and benefit from changes the economy will be witnessing.
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