Advantages of FDA in Retail in India : (1) Growth in Economy : Due to foreign companies entering into retail sector, new infrastructure will be built thereby bolstering the Jagging real estate sector. In turn, banking sector will also grow as the funds needed to build infrastructure will be provided by banks. (2) Job Opportunities : It has been estimated according to government, that approximately ten million Jobs will be created mostly in retail and real estate sectors. (3) Benefits to Farmers : In the retailing business, the intermediaries have dominated the interface between the manufacturers or reducers and the consumers.
Hence the farmers and manufacturers lose their actual share of profit margin, as the lion's share is eaten up by the middlemen. This issue can be resolved by FDA , as farmers might get contract farming, where they will be able to supply an organized retailer based upon demand and will get paid handsomely for that and they need not run in search of buyers. (4) Benefits to consumers : Consumers will get variety of good quality products at low prices compared to market rates and will be able to choose from various international brands at one place. ) Lack of Infrastructure : This has been one of the common issues in the retailing chain in India for years, which has led to the process of an incompetent market mechanism. To cite an example, inspire of India being one of the largest producers of fruits and vegetables, lack of proper cold storage facility significantly affects the selling of these perishable items and also in huge losses. Allowing FDA might help India have better logistics and storage technologies resulting in avoiding wastage. Due to FDA foreign companies will invest around $ 100 million in India.
Thereby, infrastructure facilities, refrigeration technology, transportation sector will get a boost. (6) Cheaper Production facilities : FDA will assure operations in production cycle and distribution. Due to economies of operation, production facilities will be available at a cheaper rate and thus resulting in availability of variety products to the ultimate consumers at a reasonable and cheaper price. (7) Availability of new technology : FDA allows transfer of skills and technology from abroad and develops the infrastructure of the domestic country. Greater managerial talent will flow in from other countries.
Domestic consumer will get the benefit of getting great variety and quality products at all price points. (8) Long term cash liquidity : FDA will render necessary capital for establishing organized retail chain stores. It is a long term investment because the physical capital in the domestic company is not easily liquidated. (9) Conducive for the country's economic growth : FDA will create a competition among the global investors, which will ultimately guarantee better and lower prices, thereby benefiting people in all sections of the society. The market growth and expansion will increase.
It will step-up detail employment. It will ensure better managerial techniques and success. Higher wages will be paid by the international companies. Urban consumers will be exposed to international lifestyles. (10) FDA opens up a new avenue for Franchising : Restrictions on FDA are regarded as trade barriers as they traverse direct market access to foreign firms. Retail giants who are very keen in looking for entry into foreign markets look for other available alternatives. These restrictions on the global retailers regarding the inflow of FDA, leads them towards getting the market entry through franchises.
Thus, countries which offer promising market potentialities for retail growth offer substantial growth in the franchising sector also. (11) According to the Indian Government's condition, foreign companies have to source a minimum of 30% of their goods from Indian micro and small industries. This will encourage the domestic manufacturing by creating a big effect for employment and technology upgrading and income generation. (12) Countries like China, Indonesia and Thailand have 100% FDA in retail. Reports show that these countries have experienced high growth in agro processing industry, refrigeration technology and infrastructure. 13) Foreign countries will also create a supply chain management in the Indian market. This will result in avoidance of food wastage and perishables. Disadvantages of FDA in Retail in India By MAT VA BUMS on February 15, 2013 in Retail Management Disadvantages of FDA in Retail in India : (1) Impact on the organized players (CEQ. Koran shops) The overall size of retail market in India at present is estimated at ' core of which, the unrecognized portion of the market is worth ' core and the share of organized portion of the market is 5000 scores.
The unrecognized market provides the second largest employment opportunities to 3. 95 million people (first being the agricultural sector). It is argued that opening the retail sector will have an impact on sales in the unrecognized sector. As a result of this, employment provided by the unrecognized sector will be affected. It is reasoned that by reducing the number of intermediaries, organized retailing will lead to some Job displacement. (2) Limited Employment Generation It is said that FDA might provide employment opportunities, but it is argued that it cannot provide employment opportunities to semi-illiterate people.
This argument gains more importance because in India, large number of semi- illiterate people are present. (3) Fear of lowering of prices There is a fear that allowing FDA in retail would result in lowering of prices, as FDA will bring in good technology, supply chain etc. If prices are lowered, then it will lower the margin of unrecognized players also. As a result of this, the unrecognized market will be affected. This in turn will have an impact on the employment opportunities provided by the unrecognized market. 4) FDA in retail will drain out the country's share of revenue to reign countries, which may cause negative impact on Indian's economy. (5) Fears that domestic organized retail sector might not be competitive enough to tackle international players might not only resulting in loss of market share for them but in closure of their units. (6) There is a possibility of small business owners and workers from other functional areas, as lot of people are involved in unrecognized retail business, may lose their Jobs. (7) Small retailers and other 'Koran Stores' may close down. 8) Supermarkets will establish their monopoly in the Indian market. Due to supermarkets fine tuning and higher accessibility they will be able to buy goods at lower prices and therefore will be able to sell at lower prices to consumers. This will result in closing of many small retailers. (9) Though Government has stipulated that 30% procurement should be from Indian sources, this may get diluted over the years. The remaining 70% procurement from cheaper countries will make the people run towards that stuff and the 30% supply from Indian small industries will have their own death, unable to compete with low price Chinese goods.