Friday, December 02, 2011

FDI in retail, how it benefits the poor ..


65% of Indian population earn a living by working on the farms, food crops or cash crops. It could be their own farms or as labourers on others' farms.

The whole ruckus on FDI in retail sector relates to the food sector considered as an essential area and which has direct implication on the wholesale price index. Other segments like apparel, footwear, cosmetics and toiletries can be neglected for the time being.

15-20% of our population are the traders who buy from the primary sources and sell to the customers / big retail chains. It is here that the costs of the food grains / cash crops goes up by at least 15 - 20% of costs given the margins / costs of transportation / costs of storage etc. Every link in this supply chain takes its cut ranging from 3 - 5 % before they deliver to their end customer. Finally before the end customer buys the items off the shelf, he will end up paying for the cuts to all the players in the chain which sees the prices jacked up , even by a conservative estimate by about 30%, at the extreme it may even go upto 60%.

When big single brand and multi-brand retailers enter the market this unnecessary cost addition but resulting in no value addition to the final customer, can be distributed between fewer players starting from the retailer himself right upto the farmer.

The farmer will end up getting at least on the minimum an increase of about 20-30% prices on his produce. Consider that about 40% of the Indian population, ie about 500 million people will benefit, either through better prices for their produce or higher wages for their efforts on the farm, this is going to be a pro-farmer action set to chage the rural landscape for ever and put a lid on the urban migration and poor living standards.

Why are politicians opposing this pro farmer action of the govt ? Is it because the votes and moolah come from the trader community, on which most of our political parties are dependent to a greater extent ? and not the poor farmer ?? Nobody wants to farmer to prosper ..

Let the political parties think more openly and care for the farmer and not for the cost incurring, no-value-giving middlemen who like a parasite would like to consume the entire agri-supply chain.

When FDI comes in the agri-supply chain, which accounts for at least 50% of the $ 400 billion retail market in the country, it is going to benefit the nation in terms of setting up excellent infrastructure all along from the farmer to the retail warehouses, in terms of transportation and storage, reduce the time it takes for produce to reach the retailers shelves across the country, reduce the wastage  which otherwise is the greatest bane of the agri supply chain amounting to almost 40% of the total quantity and equally in terms of value, bringing down the end customer's spending on food items and thus reigning in inflation !

Are the politicians not ready to rein in corruption by middlemen and inflation of the common m?

ge..

2 comments:

  1. the supporting parties for foreign direct investment should give awareness program and educate farmers... probably in unity.. this may be enforceable.

    ReplyDelete
  2. i agree sir. it is counterintuitive this FDI in retail thing. At first it appearslike "hey, those foreigners would take our moolah and value". but then really the moolah is still concentrated among a few wealthy who anyway syphon(correct spelling?) it outside one way or the other. Alos, it might reduce corruption and benefit the country on the whole. So its a good debate material, this thing.

    ReplyDelete

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