FDI in retail’s onion connection

When you start looking forward to a package of onions for Christmas, you know there is something seriously amiss with the world. Sadly, that’s the fate a lot of Indians, yours truly included, have been reduced to over the last few months as the nationwide spike in onion prices, combined with double digit food inflation ,  has once again brought tears to the eyes of harried customers across the country. More importantly, it has highlighted  the ridiculous state of affairs in our country, wherein despite being the second largest producer of vegetables in the world, India continues to remain a perennially food-deficient nation. What is particularly galling is how this absurd scenario could be avoided if the government were to get its act together on one fundamental issue, namely FDI in multi-brand retail.

The case for FDI in retail appears to be compelling on multiple counts. Almost 40% of our annual agricultural produce goes to waste due to lack of adequate storage and warehousing facilities. Global retailers such as Walmart(already present in India in alliance with the  Bharti  group in the cash and carry segment), Carrefour and Tesco, once  allowed to enter, would  not only bring along global best practices associated with the industry, but would also be forced to invest in cold storage chains which play an important role in reducing spoilage and maintaining the quality of harvested products. Leading names in the cold storage industry such as Ingersoll Rand, Carrier and  Dupont would be more than happy to set up shop in a market that is growing at 20-25% per annum and is expected to reach Rs.40,000 Cr by 2015. Not only would this benefit the farmer by getting him a better price for his produce but would also result in the cost efficient delivery of farm products to the end consumer.
The biggest hurdle in the path of FDI in multi brand retail comes in the form of the small kirana or mom and pop stores who fear they will be wiped out once big retail is allowed to enter Indian shores. This small traders association has so far successfully stalled all government initiatives aimed at liberalizing the retail sector in India by enlisting the support of parties from across the political spectrum, with both the left and the right finding common cause in not allowing foreign players into the country. What most of these critics don’t realize is that foreign investment in retail could go a long way in creating millions of new jobs at different levels and could very well co-exist with local retail-in Brazil for instance , even 20 years after FDI was allowed to enter,  organized retail still accounts for less than one-fourth of the overall retail sector in that country. Unfortunately, with political opinion sharply divided on the issue, there doesn’t appear to be any immediate relief in sight.
However, all is still not lost. With the once humble onion inching its way towards  exotic delicacy status with each passing day, I  believe the government will be forced to take a final call on this pressing issue soon and not allow vested interests to come in the way of a decision that is bound to offer relief to millions of food lovers across India. The only onion I am having for Christmas next year will be the one in my favorite Paneer-do-pyaaza.

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