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FDI in Indian Retail Sector: A Bane or Boon for Farmers

FDI in Indian Retail Sector: A Bane or Boon for Farmers. Dr. Ajit Singh Associate Professor Dept. of Commerce Govt. Postgraduate College, Ambala Cantt (INDIA). Introduction. Retailing in India is one of the pillars of its economy (14-15 % of GDP).

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FDI in Indian Retail Sector: A Bane or Boon for Farmers

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  1. FDI in Indian Retail Sector: A Bane or Boon for Farmers Dr. Ajit Singh Associate Professor Dept. of Commerce Govt. Postgraduate College, Ambala Cantt (INDIA)

  2. Introduction • Retailing in India is one of the pillars of its economy (14-15 % of GDP). • Indian retail market is one of the top 5 retail markets in the world by economic value. • Opening up of FDI in retail sector led to debate: roll-out red carpet for welcome or red signal to stop. • Requires thorough study: pros and cons

  3. Criteria for opening up of FDI in retailing • Stores opening in cities more than 1 million population (45 cities as per 2011 census) • Minimum capital requirement for FDI in retails is $100 million (50 % go for back-end infra. dev.) • 30 % goods be purchased from local suppliers

  4. Pros • Help in raising income of farmers • Help about 5 lakh villages for having infrastructure • Enable ‘Contract Farming’ • Provide assured price • Eliminate middlemen i.e. control the prices • Healthy competition i.e. better quality products • Provide employment to about 10 million people • Loss of perishable items which is between 35-40 % may be checked through cold-storage facilities

  5. FDI in retail: farmers’ perspective • FDI in the retail sector will affect agriculture a lot as 70 percent of the retail business is in food items. • Agriculture as mainstay of the Indian economy engaging about 60 percent of the population. • Agriculture area has not been subject to comprehensive reforms in India. • Adequate and timely credit to the farmers is indispensable for agricultural development. • Farmers have to depend on outside sources of finance for meeting their essential needs.

  6. Contd… • most of them are heavily involved in debts and cannot afford to spend money for making improvements in land • forced to sell their produce to the latter at reduced prices for repayment • whether it will benefit about 92 million small and marginal farmers

  7. FINDINGS Problems being Faced by Borrowers in Getting Loans from Commercial Banks • ‘Difficulty in collecting record’ has been found to be the most common problem being faced by the respondents followed by reason of ‘More paper work’. ‘Lack of desired security’ and ‘Complicated process’ are found to be another problems.

  8. Reasons for Refusing Loans by Banks • ‘Inability to provide security’ has been found to be the most important reason for the refusal of loan to the farmers.

  9. Timeliness of Loans • It shows that 54.7 percent marginal farmers availed loan amount after a fortnight while in case of large farmers the percentage is just 35.3 percent. It may be due to the reason that large farmers have more and easy access to the banks.

  10. Credit Requirements and Gaps • Farmers need credit for allied activities also in addition to agricultural purposes. ‘Construction of irrigational channels’ ranked first followed by ‘land development purposes’.

  11. Sources Used to Meet the Additional Requirements • Borrowing from private moneylenders has been found to be most important source used to meet the additional credit requirements.

  12. Delay in Refund of Loans • ‘Inadequate income’ has been found to be the dominating reason for delay. ‘Increase in cost of production’ is the second followed by ‘Natural calamity’.

  13. Facilities expected by the farmers • ‘Simplified procedure’ has been ranked the first expectation. ‘Provision of quick service’ ranked as the second.

  14. Cons • Easy success to big MNs in controlling the market • No way uplifting the economic conditions of the farmers • Leave the farmers on the mercy of MNs for fixing the price • Benefit only a few section of the society • Job loss to small retailer kirana shops

  15. Suggestions • Parallel public sector mechanism should also function to fix the prices to check monopoly of any co. • Passing on the benefits to common man also • Should bring FDI in other more imp. area also i.e. electricity production, infra. dev.

  16. Conclusion Supreme court rejects PIL against retail (news on ‘The Tribune’ dated May 2, 2013) • Dismissed PIL against govt’s policy allowing 51 % FDI in multi-brand retail sector • Statistics showed that farmers will get 60 % higher returns • Presently farmers getting 12-15% of price paid by consumer • Good experience of dev. Countries allowing 100 %

  17. Thank you!

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