FDI in Retail

Dated : February 16th, 2009

Dr.Murli Manohar Joshi
Parliamentary Committee on Commerce
New Delhi

Ref : Foreign Direct Investment in Retail Sector

Dear Dr.Joshi,

I wish to draw your attention to the following for a postive consideration and further recommendations.

There has been a lot of debate about the opening of the retail sector for foreign direct investment

My view is , that the retail sector in India is a major employer and is the key to India’s youth employment and empowerment . It today comprises of about 12 million establishments . Adding to this, there are atleast 2 helpers at a retail outlet. Further , indirect employment is provided to at least 6 people

With such a massive employment potential . We must consider the following before we talk of FDI in retail sector

1. Why should foreign brands take away India’s earnings ? Land is ours, employees are ours, spending is ours , raw material is ours. Then why do we allow foreign co’s take away our earnings by just putting their brand names ?

2. It is a known fact that, most of the reputed brands all across the wordl manufacture their products in India sub continent and sell across the World . The products are of highest international quality and well accepted . Why do we not sell locally and serve the local economy as well

3. It is well known that this big foreign MNC’s change the rules of the game by increasing rentals , salaries and lowering prices or even increasing them . Thereby , making it difficult for the localites to operate . We cannot regulate all this , but for sure , we can check the entry of these MNC gaints

4. What the retailers in India need is a different version of FDI – Finance from Domestic Institutions . If we get finance from domestic finance intitutions , we will be more competitive and we can grow profitably and grow even internationally . Indian products are already sold in differne parts of the world

5. I also suggest you to consider and recomend that retail be given an ‘industry status’ and there should be a separate ministry for retail and vocational training . That also takes care of re-skilling of the talent . We have a sever skill gap that needs to be immediately addressed

Hope that your good selves will consider my suggestions and incorporate with your recommendations

Looking forward to hear from you

Thanks again with high regards

Rajendra Pratap Gupta
Mobile : +91 9323109456
+91 9867300045
Email: president@countryfirst.org / mail@rajendragupta.org

Aditya Birla Retail – Dead end ????

Aditya Birla retail seems to be nearing a dead end. With arround 640 stores and losing close to Rs.30 crore a month. It might be the most difficult business for the Birla Group so far. What is interesting to note is , that there are 640 stores, and out of them 100 stores are having a sales of Rs. 5 to 6 per sq.feet. Whereas , the expenses are above Rs.200 per sq.feet. Knowing well, that any expenses including rental , if exceeds Rs.110 per sq.ft. It is a loss making proposition.

All this started with Kumar Managalam pushing for numbers in the initial days. Due to intense pressure, Sumanta Sinha did what the master expected. So the pressure filtered downwards , leading to the number game and the quality of the locations and the rentals were compromised heavily.

Now more than 100 stores need to be closed in my view, and earlier the better, or the business gets on the block. The grapevine is, that Mckinsey is doing a valuation excercise.

Adding to this mistake of chasing number game is the expat seniors who take crores of package , and learn the Indian retail business at the expense of the biggies like Reliance or Birla’s. Time will tell us, those who don’t know what is being sold and where, are teaching India how to sell ???

Hiring expats is another stupidity from the Indian retailers. Who will learn the lesson the hard way.