ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Implications of FDI in Food Supermarkets

This survey of the global and Indian experience with retail supermarkets, against the backdrop of a recent official paper on foreign investment in retail, highlights malpractices due to buying power, employment loss in the value chain, and an unwillingness to share the risk of the growers. In this context, it would be prudent to slow down supermarket expansion by using mechanisms such as zoning, business licences and trading restrictions. Measures to ensure smooth functioning of the contract farming system should include strengthening competition laws to limit buying power, providing legal protection to contract growers and encouraging farmer cooperatives and producer groups.

The discussion paper “Foreign Direct Investment in Multi-Brand Retail Trading” put up by the Department of Industrial Policy and Promotion (DIPP) for public comment on 6 July 2010 describes the various aspects of the Indian retail sector like its size and nature, recent growth, and its economic and social significance besides the limitations of the present set-up. It then examines the positive and negative implications of foreign direct investment (FDI) in the retail sector based on the reports of various committees/institutions/bodies – academic and business, official and non-official. This article discusses the existing supermarket experience in India in the perishable produce sector – fruits and vegetables (F&V) – and examines the global experience of supermarket practices. It also looks at the implications for smallholders and traditional retailers, and regulatory issues and mechanisms for protecting their interests.

Indian Supermarket Experience

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