Sunday, August 29, 2010

Economic Times of India: Worries about Entry of Foreign Supermarkets Exaggerated?

The attached article was published in the Economic Times of India. We believe that it is indicative of the typical foreplay between local and foreign investors and lobby groups whenever - as part of Globalization trends - foreign firms start to enter a country. India is still mainly an agricultural giant, but its main strengths lie somewhere else (IT, manufacturing etc). To grow in these areas, increased efficiency and freeing of resources from agricultural is a necessary longer term trend.

Foreign Direct Investments are NOT a magical formula, but they are definitely also not sent by the devil. it is all about how to transform the inflow of money, knowledge and skills into positive trends for the economy.

And that will certainly lead to a redistribution of relative income received by suppliers, wholesalers and supermarket retailers. Nothing wrong with that.

The only certainty we have is that of:
a) an inflow of funds into the economy
b) an inflow of knowledge and expertise about how to run a supermarket chain
c) increased competition with local supermarkets 


 Agriculture in India; Increased Efficiency Needed
FDI's one way of triggering change

All three elements are good for a recipient economy in the longer run. In the short run, they will lead to a necessity to adjust business practices for both supplying farmers and competing supermarkets.

Is that bad? Taking into account the level of development of India, its size and relative strength we doubt it. Obviously lobby groups of both farmers and competing local supermarkets might be worried, but in the longer run consumers will benefit and so will India as a whole. Improved efficiency in the food chain (from supplying agricultural produce to offering products to consumers in the supermarket) will free resources (people, funds) that can then be used in other industries in which India is building a fantastic competitive position.

Click here for the article from the Economic Times of India

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