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Tesco and Walmart could move into India to solve country's food problems

Discussion in 'World Economy' started by CONNAN, Jan 29, 2011.

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  1. CONNAN

    CONNAN Major ELITE MEMBER

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    India is poised to lift foreign direct investment (FDI) restrictions for foreign supermarket giants such as Tesco and Walmart, its corporate affairs minister has indicated.

    In a television interview on India's CNBC-TV18 business channel, Jyotiraditya Scindia said he was concerned about a 35pc decline in foreign direct investment in 2010 and that he believed lifting restrictions in sectors such as multi-brand retail and defence could reverse the fall.

    His comments follow the visit to New Delhi last week by Business Secretary Vince Cable that saw him lobby India's commerce minister, Anand Sharma, to further relax restrictions on foreign direct investment in higher education, defence, financial services and the retail sectors.

    Britain has been disadvantaged in its attempt to capitalise on India's breakneck 9pc annual growth because of heavy restrictions on investment in sectors where it is strong.

    Last week Mr Cable told Indian ministers its current food crisis, in which shortages of supply have sent prices of staples such onions and grains soaring, could have been minimised if supermarket giants like Tesco had been able to set up in India.

    The Indian government wants foreign investment to establish new cold chain logistics systems and warehousing facilities to dramatically staunch the loss of up to 40pc of its food produce that rots every year before it reaches the market. More than 17m tonnes of food grain was left to rot last year because there was no space to store it in suitable warehouses – a loss of £2bn.

    Some of India's leading conglomerates, like Reliance Industries Ltd and Bharti, have launched domestic supermarket chains but have struggled to find sufficiently large sites in urban centre locations.

    Now, after more than four years of indecision, the New Delhi government finally looks set to turn to foreign supermarkets to solve its food problems.

    "The next rise in FDI will only come through a greater amount of opening up in the FDI arena. There are three or four areas that are today under our ambit, in terms of what we are looking at – retail, defence being a couple of those," Mr Scindia said.

    The issue has been considered by the Ministry of Agriculture and the chief economic adviser, and a report was sent to the Corporate Affairs Ministry late last month. "In the next couple of months you will see traction on this front," the corporate affairs minister added.

    He said the reform would extend beyond retail to the whole food sector. "It's really back-end to front-end – it is extremely important in terms of also reforming the value chain and bringing much more value from a logistics point of view to the farmer as well," he added.

    Despite widespread support for the move within the dominant Congress Party wing of the ruling United Progressive Alliance coalition, other parties in the government oppose it. They represent the 15m small grocers who currently control the sector and are regarded as a powerful political lobby.

    However, ministers are understood to have been emboldened on the issue from support from opposition parties in control of some state governments.

    The most likely British beneficiary is Tesco, which formed an alliance with Tata, one of India's largest conglomerates, to help it build a new hypermarket chain and warehousing and supply systems.

    It seems Tesco-isation globalisation is set to continue apace.

    Tesco and Walmart could move into India to solve country's food problems - Telegraph
     
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  2. CONNAN

    CONNAN Major ELITE MEMBER

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    Tesco committed to scale up investment in India: Leahy

    Prakash Chawla Davos, Jan 28 (PTI) World's fourth largest retailer Tesco is willing to scale up its investments in India to build supply chain for consumer items, particularly from the farm sector, without getting bogged down by delays in the opening of FDI in multi-brand retail by the UPA government. "Yes, there are enough opportunities to scale up investment," Tesco Chief Executive Terry Leahy told PTI.

    Asked whether the UK-based retail chain would go ahead with investments in India, without waiting for the opening up of foreign direct investment in retail, Leahy said, "Yes, yes." However, Leahy did not give the investment details. On his meeting with Commerce and Industry Minister Anand Sharma, Leahy said, "We have been asked to go for upstream investment." Both Leahy and Walmart CEO Mike Duke met Sharma here yesterday on issues pertaining to the retail sector. At present, 51 per cent FDI is allowed in single brand retail and none in the multi-brand retail. However, 100 per cent FDI is allowed in the cash and carry or wholesale segment. Global majors including Walmart, Metro and Carrefour are already operating their wholesale business in the country. The government is looking at the possibility of opening up the multi-brand retail for FDI.

    The Department of Industrial Policy and Promotion (DIPP) had floated discussion papers on opening FDI in multi-brand retail, and increasing foreign investments in the defence production. In the paper, the government has suggested that FDI in multi-brand retail should be contingent on the investors pumping in at least half of the money into building the back-end supply chain. The DIPP is studying the report submitted by an expert committee, which has evaluated the stakeholders comments on the issue. The demand for opening up the multi-brand sector has been intensifying, especially in the wake of wide gap between the wholesale and retail prices.

    Also, Planning Commission Deputy Chairman Montek Singh Ahluwalia has favoured opening up of the multi-brand retail sector to foreign investors, saying it will benefit farmers and also help in containing food inflation. Food inflation inched up marginally to 15.57 per cent for the period ended January 15 from 15.52 per cent for the week ended January 8, on account of escalating vegetable prices, particularly onions that have been selling considerably lower in the wholesale

    Tesco committed to scale up investment in India: Leahy, IBN Live News
     
  3. CONNAN

    CONNAN Major ELITE MEMBER

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    Top CEOs show interest to step up engagement with India

    DAVOS: Top global CEOs, including those of Wal-Mart, Rio Tinto, Tesco and Applied Materials, met Commerce and Industry Minister Anand Sharma here last evening, sharing their enthusiasm about opportunities in the growing Indian economy.

    Those who met Sharma included Wal-Mart CEO Mike Duke, Tesco Chief Executive Terry Leahy, Sistema Chairman Vladimir Evtushenkov, Rio Tinto Chief Executive Tom Albanese and Applied Materials head Michael Splinter.

    A senior official, who was present at the meeting, said given the consistent economic growth in India, the world business leaders expressed their interest in increased commitment to India, in terms of strengthening their presence in the world's second fastest growing economy.

    Sharma, he said, told them that barring a few sectors, India has opened the gates for foreign direct investment in all the areas.

    He said the global retailers can invest more in the back-end infrastructure like building supply chain between the farm producers and the retailers.

    Davos annual WEF meeting is all about networking and cementing ties with India remains on top of the agenda of the global corporates, said a senior Indian industry leader.

    "We have been advised to scale up investment in upstream activities," Tesco CE Terry Leahy told PTI .

    Sistema, which has a collaboration with Shyam Group in India, expressed his company's increasing investment in the Indian telecom sector with a subscriber base of 750 million.

    Though FDI into India declined in 2010-11 due to global slowdown in the previous years, the country remains a priority area for the investors.

    India's FDI inflows declined by 27 per cent to USD 14 billion during April-November 2010-11 compared to the same period last fiscal.


    Top CEOs show interest to step up engagement with India - The Economic Times
     
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  4. Coltsfan

    Coltsfan <b>SENIOR MEMBER</b> SENIOR MEMBER

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    That should help with the speculative price hikes as witnessed with Onions recently.
     
  5. reddy579

    reddy579 FULL MEMBER

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    COMMITMENT TO INDIA? By MNCs?

    WTF?

    They are here to capture market. This is a very very bad news to the Indian retailers and customers.

    I knew we are wasting food due to lack of facilities. But we should find answers by ourselves.

    If we allow these guys they slowly woo the govt to allow them into farming, buying lands, food chains, there by controlling prices.

    also do not forget how many families are depended on retail sector. They all get vanished in few years.

    and ofcourse needless to say about farmers and villages. They just get vanished.
     
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  6. Manmohan Yadav

    Manmohan Yadav Brigadier STAR MEMBER

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    Tesco and Walmart <------------- Domestic Market Killers
     
  7. ManuSankar

    ManuSankar Major SENIOR MEMBER

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    This is just stupidity,they are not here solve any of our food problem,they are here to capture our markets and make profit out of it.Do you think our millions of poor people will be able to afford Tesco and Walmart??
    And besides this will be a severe blow to our retailers.
     
    Last edited: Nov 11, 2011
  8. vikas jat

    vikas jat Captain SENIOR MEMBER

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    they are just intrested in making money
     
  9. reddy579

    reddy579 FULL MEMBER

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    Today I posted a new thread asking for who are the owners of this forum and why this forum has the similarity to that of pakistani forum?

    and you know my post was immediately deleted.
     
  10. Shikari

    Shikari 2nd Lieutant FULL MEMBER

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    Actually, I am not against this at all. We do waste a lot of food because of bad facilities. We let food rot on its journey from the farmer to the consumer. We let food rot because we can't store it. We let food rot because the individual sellers can't always sell their products in time.

    If Tescos and Walmart came along, they'd transport the food from the farmers in refrigerated vans. They'd take it to refrigerated stores and then they'd sell it in air-conditioned super-markets. What do you think will happen when less food rots? There will be more food around. A higher supply ACTUALLY translates to a smaller price.

    The second reason I want them to come is because I want the "middle man" to be gone. People make a living by buying food from the farmers and selling it to the shop keepers. In some places, farmers sell to middle men, who sell to OTHER middle men, who sell to shop keepers. Well, these middle men all make profits, so the price of the food goes up with every transaction. This means prices of food products go up artificially. Anyone else in here think that prices should come down?

    Yes, it is true that the middle men will lose their jobs if these companies come along. Well, how many of these men are there? All of urban India pays a higher price for these middle men. Farmers get FAR less money than what they'll get under these supermarkets - because there is just one transaction. And it's not like the middle men were doing something very useful and we decided to take their jobs.

    My third reason is competition. In India, the same product can cost different in three different parts of the same city. This is because the shop owner sells to the neighbouring community and he knows how much they'll pay for something without going farther away to find something cheaper. If we bring 3 supermarkets in and one of them decides to make huge profits by over charging, noone will buy from it and they'll all go to the other two. This is because supermarkets can't legally charge different prices to different communities. In other words, if one supermarket decreases prices a little, the others will be forced to do the same as otherwise they'll lose customers. Actually, the compeition will mean all three supermarkets will sell their products with minnimum profit so that they don't lose market share.

    Fourthly, you say that these guys are here to capture our markets BUT you also say that since they'll charge so much that millions of people won't be able to buy from them. And you also claim that this will kill retailers!!! Let's get something straight.... IF they charge more than normal shop keepers, then normal people won't go there. They'll just buy from their neighbourhood stores like they always have. So, they won't really get much of the market share (since so many are poor compared to the rich) and the retailers won't really be hurt bad. So, EITHER they'll charge high prices and the rich will go there and very few retailers will be hurt OR they will charge much lower prices (low enough to convince you to make the extra journey to the supermarket) and the retailers will lose their jobs. We can't have both. I am inclined to believe that the latter will be true - this will give us some breathing space with so much inflation.

    However, this might actually be good for our retail industry aswell! Sure, in the short run the retailers will lose business. But they will learn to adapt (they will HAVE to adapt) to decrease their prices by being more efficient or they'll lose their jobs. Some will lose their jobs, I am sure. But others won't. They'll compete with Tescos and 10 years from now, they'll be building Indian brand supermarkets in London. Right now they don't need to be globally competitive since they can get away with charging more.

    Lastly, just to clarify, I highly doubt that these supermarkets will be allowed to buy farms and make their own food and put farmers out of business. Firstly, I am an NRI and I don't have the right to own agricultural land-the government is very strict about this. Secondly, these companies don't turn into farmers because that is not what they're good at. In other words, they are good at selling food cheaply.

    Hope that made sense. I've used both Tescos and Walmart and they're well cheap - much cheaper than anything else out there.
     
    Last edited: Nov 12, 2011
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  11. G777

    G777 Lt. Colonel ELITE MEMBER

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    :smile:

    "Tesco... Every little helps"

    First time I have ever heard of a shop coming to the rescue :buba_phone:
     
  12. Shikari

    Shikari 2nd Lieutant FULL MEMBER

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    Cabinet clears 51% FDI in multi-brand retail

    After years of dithering, the Indian government has decided to allow global retail giants like Wal Mart, TESCO and Carrefour to enter India. The cabinet cleared 51 per cent foreign direct investment (FDI) in multi-brand retail on Thursday.

    The Cabinet also cleared 100 per cent FDI in single-brand retail.

    There was an air of anticipation. The stock market rallied behind the retail sector and pushed up share prices of companies like Pantaloon India, Celebrity Fashions, Vishal Retail and Koutons by eight to ten per cent.

    Currently, India allows 51 per cent FDI in single brand retail and 100 per cent FDI in cash and carry format of the business. The decision to open up the sector is driven by the inability of the government to tackle the surge in inflation.

    Most ministries, including those of finance and textiles were in favour of the industry ministry's proposal to open the politically sensitive sector to foreign players.

    Earlier, a panel headed by Cabinet Secretary Ajit Kumar Seth had recommended 51 per cent FDI in multi-brand retail, which is dominated by mom and pop stores. The recommendation came with certain riders.

    The panel had suggested that at least 50 per cent of the investment and jobs should go to the rural areas. Besides, entities with FDI should source at least 30 per cent of their requirements from the MSME (Micro, Small and Medium Enterprises sector). A foreign player would also have to commit at least $100 million investment.

    Other recommendations included - allowing such mega stores to sell non-branded items. Such entities would be allowed only in towns with population of over 10 lakh.

    A decision on the sensitive issue is pending for over two years as opposition parties are against foreign investment in this sector. The $600-billion segment is dominated by small kirana shops. The Opposition has expressed concerns that allowing major global retailers would lead to unemployment among the unorganised sector.

    Analysts have argued that benefits of opening up the retail sector far outweigh costs. In United States, organised retail has helped tackle wholesale price inflation over the years.


    Cabinet clears 51% FDI in multi-brand retail - NDTV Profit[
     
  13. vigour

    vigour FULL MEMBER

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    Very well written post incorporating clear economical aspects . Agree with your points above, most importantly the highlighted part. If you have stable business (small or large) doesn't mean that the government here will come and rescue you and try to prevent the competition in the market; the end result of which is the higher cost to the consumer.

    I think it is a good step and will change the course of our ruined govt. PDA system.
     
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  14. lucifer

    lucifer Lieutenant SENIOR MEMBER

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    well.... as long as walmart doesn't screw us over like they did to US, I'd be more than happy to have them over.
     
  15. Nick 779

    Nick 779 Captain SENIOR MEMBER

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    It is a welcome and long delayed move. It will bring down prices and improve the supply chain and our farmers will get good prices.:welcome:
     
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