Consumer is King: SC approves government proposal on FDI in multi-brand retail

The court will only interfere when any policy is “unconstitutional, contrary to statutory provisions or arbitrary or irrational or there is total abuse of power,” the Supreme Court said

 
In a landmark judgement, a three-judge Supreme Court bench of justices RM Lodha, Mohan B Lokur and Kurian Joseph recently said, “Consumer is king and if that is the policy, then what is wrong in it?”
 
The Supreme Court upheld the government’s proposal in multi-brand retail trade, as this will enable the consumer to get goods at competitive prices, make choice of purchase available and eliminate middlemen, who were a curse to the Indian economy. No doubt, in the past, these very middlemen have played an important role in the development of trade and have helped businesses to grow, but their greed has caused untold damage to society. They need to be controlled and to the maximum extent possible eradicate this curse.
 
The bench further explained that the court will only interfere when any policy is “unconstitutional, contrary to statutory provisions or arbitrary or irrational or there is total abuse of power”.
 
As the reader knows, the US retail giant, Wal-Mart, is already in India, under a tie-up with the Bharti Group for cash and carry wholesale operations. Carrefour from France and Tesco from UK are on line to enter the Indian market soon.
 
Commerce minister Anand Sharma, while dealing with Tesco officials, stated that 50% of the total initial investment should be into the creation of new back-end infrastructure facilities. It may be recalled that in September 2012, Foreign Direct Investment (FDI) up to 51% was opened for multi-brand retail trade.
 
Interested foreign companies in multi-brand retail trade are expected to make an initial investment of $100 million out of which $50 million should be for back-end infrastructure facilities, and this rule does not apply to subsequent investments.
 
Additionally, in order to encourage small and medium enterprises in the country overseas participants are expected to source 30% of their requirements locally.
 
In the beginning there was a great uproar that FDI in multi-brand retail would kill the corner kirana shops. These have been actually thriving; even supermarket chains sprung up all over the country.  In fact, every major business house, such as Reliance, Tatas, Birlas, Goenkas, etc area already into retail trade and they have definitely reduced the active role that middlemen have played in the past.
 
The truth is that, in the long run, it may still not be possible to totally eradicate the middlemen who hold different hats while operating from the actual area of production. Small farmers continue to depend upon them for credit and other forms of assistance when needed.  Besides, many of these middlemen have political clouts where they operate and even for the top Indian business houses, which have got into this field in the last few years; it will take some time before they can generate the trust, confidence and dependence of the small producer.
 
Elimination of the middlemen will, certainly, reduce one of the main source of inflation artificially created by these middlemen. The road is long, but it can enable us to reach our goal.
 
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
Comments
PRABAL BISWAS
1 decade ago
Me residing in Waste Bengal have seen the encouragement of hawkers. Even if the price is less in Reliance they still go to hawkers . They make the environment so dirty. Also the entire city is a slaughter house. Somehow,cleanliness of a their city has nver been a priority for Indians. Welomce FDI.
pravsemilo
1 decade ago
Consumer would be king only when there is a significant price difference between the thela waala and the supermarket. I can't imagine such a arbitrage.

Even now I don't see a difference between the super market chains and subzi mandis. If there does exist a price difference then there is a compromise on quality. May be it is just me, but I prefer going to the thela waala itself for both price and quality.

May be my views are bit myopic. Feedback is welcome.
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