Current News & Topics (Non Political) - Discussions [Archive]

chennaiyorker

September 15th, 2012, 06:54 PM

Some Facts about FDI in retail....

Q: What would be the impact of FDI in Retail on the domestic retail sector?
A: The Indian retail sector is the second largest employer in India after agriculture, employing over 4 crore (40 million) persons as per the latest National Sample Survey (NSS) 2009- 10. Most of these are small unorganised or self-employed retailers, who are unable to find gainful employment in other sectors of the economy.

The average size of a Walmart supermarket in the US is 108000 sq.ft employing around 225 persons. In 2010, Walmart sold $405 billion amount of goods through its 9800 odd outletslocated across 28 countries, employing around 2.1 million (21 lakh) persons.
This implies that one Walmart supermarket can displace over 1300 Indian small retail stores and thereby render around 3900 persons jobless. The employment created against this in that supermarket will be 214 (or maximum 225, which is the average in the US). Clearly, there will be severe job losses if giant MNC supermarkets are allowed entry into the Indian market.

Q: Can FDI in Retail create 10 million jobs in 3 years?
The Commerce Minister has claimed that FDI in retail will create 10 million (1 crore) jobs in 3 years with 4 million (40 lakhs) jobs created directly and the rest in the backend logistics. The number of stores worldwide and employee strength of the top 4 MNC retailers are given below.

Number of Stores Worldwide Total Number of Employees Average Employees per Store
Walmart 9826 21,00,000 214
Carrefour 15937 4,71,755 30
Metro 2131 2,83,280 133
Tesco 5380 4,92,714 92

If 4 million jobs are to be created in India in 3 years, even the Walmart, which has the largest average employee per store, will need to open over 18600 supermarkets in India! If the average of the 4 top global retailers areis considered, i.e. 117 employees per store, over 34180 supermarkets have to open in 3 years to employ 4 million people – i.e. 644 supermarkets in each of the 53 cities!! Can these absurd claims made by the Commerce Minister be taken seriously?

Q: Would the restrictions imposed by the government protect Indian retailers?
A: The restriction that MNC supermarkets will be initially allowed in only 53 cities with over 10 lakh population is meaningless, since most small and unorganised retailers are concentrated in these urban areas. These 53 metropolitan areas and cities account for almost 17 crore (169.54 million) people. The number of persons employed in retail and wholesale trade in these 53 cities is over 2 crore. This is where the maximum displacement would occur. Moreover, MNC retailers are most interested in tapping the metropolitan and urban segment of the market, where people have higher purchasing power. They are hardly interested in catering to semi-urban or rural areas.
The existing big private sector retailers in India can also be bought over by the MNCs. This is how the global retailers have expanded their operations in many developing countries in Latin America and Asia. For instance, the Walmart entered Mexico in 1991-92 with a 50-50 joint venture with local firm CIFRA. By 1997 it had acquired majority stake in the venture and increased its stake to 60% in 2000. By 2004, Walmart alone accounted for over 25% of all retail sales in Mexico and 43% of all sales by the big box retailers.

Q: Would the Indian micro and small enterprises(MSEs) benefit from the entry of global retailers?
A: The mandatory 30% sourcing by the global retailers from the micro stipulated by the government has also created confusion. While the Commerce Minister insists that this is meant for Indian MSEs, the press note issued by the Commerce Ministry clearly states:
“Thirty percent sourcing is to be done from
(MSEs) which can be done from anywhere in the world and is not
India specific.

Moreover, India has signed Bilateral Investment Promotion and
Protection Agreements (BIPAs) with 71 countries till date, which
explicitly provides ‘national treatment’ for the investors of these
countries. These 71 countries, which include most major
countries of Western and Eastern Europe as well as South East
Asia and some West Asian, Latin American and African countries,
will demand sourcing from their MSEs. Therefore, the 30%
sourcing requirement would in effect mean MNC retailers
sourcing cheap products from MSEs across the world bypassing
tariff protection and dumping them in the Indian market, hurting
the interests of the Indian MSEs. The government does not have
any monitoring mechanism to prevent this from happening.

Q: Would Indian farmers benefit from FDI in retail?
A: It is being claimed by the advocates of FDI in retail that the
elimination of intermediaries and direct procurement by the MNCs would secure better prices for the farmers. The fact is that the giant retailers would have far greater buyer power vis-à-vis the farmers compared to the existing intermediaries.
This is confirmed by international experience. A large number of members of the EU parliament adopted a declaration in February 2008 stating: “throughout the EU, retailing is increasingly dominated by a small number of supermarket chains...evidence from across the EU suggests large supermarkets are abusing their buying power to force down prices paid to suppliers (based both within and outside the EU) to unsustainable levels and impose unfair conditions upon them”. This declaration came in the backdrop of protests by farmers against supermarkets across European countries like France, Italy, Netherlands, Belgium, Ireland and Hungary. The nature of the complaints were similar: the giant retailers were squeezing the prices paid to the farmers for products like milk, meat, poultry and wine, in some instances forcing them to sell at below cost prices. The US Justice and Agriculture departments have also jointly conducted workshops and public hearings on corporate concentration and competition in the domestic food and agriculture markets in 2010.
The South East Asian experience also shows how the small farmers derive no benefit from the expansion of the supermarkets. In Malaysia and Thailand, the supermarkets progressively reduced the number of fruit and vegetable suppliers over time and started procuring increasing shares from the wholesalers and other intermediaries rather than farmers. Moreover, several malpractices by supermarkets have been documented in a number of studies, like delayed payments, lowering prices at the last minute when supplier has no alternative, changing quantity and quality standards without notice and support, removing suppliers from list without good reason, charging high interest on credit etc.
The overwhelming majority of farmers in India are small and marginal farmers, who operate less than 2 hectares of land. The severe problems faced by them today mainly relate to rising input costs, unremunerative prices and lack of access to institutional credit, technology and markets. What they need is enhanced state support and intervention. Procurement by MNCs, far from solving their problems would only worsen their situation.

chennaiyorker

September 15th, 2012, 07:59 PM

Third point -> I want to go into detailed financial concept here. Time value of money. A dollar you have in hand today is worth more than the dollar you will have tomorrow. This plus volume (increasing productivity capacity) explains why huge volume selling is both good for customers and small players. This concept is no different than a micro-credit albeit in a different way. Will write more on it later.

Not being too specific here...Time Value of Money does not work in favor of the farmers/SBO in the examples that Kannan suggested. yes, one rupee today is worth more than one rupeee tomorrow, but definitely not worth more than 5 rupees in three months (in case of the Broom example), even if you consider high inflation and interest rates. That is an example of pure predatory pricing.

Plus, I don't think the argument of huge volume will offset the loss (economy of scale), would apply to small business (or farmers). Their cost will be influenced by market, and as long as they are small, they will not be able to reduce cost. It may apply to medium and big suppliers, but not marginal farmers and SBOs. So, in time the small businesses and farmers will be taken over by the medium and big one's and displace those weak folks. The policy should be mindful of this and should coincide it with promoting growth in manufacturing/infrastructure sector where these displaced folks can be employed going forward. If not, you gonna have a big unemployment crisis.

I believe FDI will bring in lots of opportunities, but it also has lotsa pit falls. The policy makers, if they are mindful of this and make strict policies to protect the weak without succumbing to the pressure (bribes) from the corporates, it will do good for the country. After all we have such a huge market, and we should leverage it to have policies that is favorable to the country and not the corporates. Also, they need to have good policies to stimulate manufacturing and infrastructure sector, which will offset the impact of unemployment caused by the entry of big corporates into the retail sector.

sanjaysan

September 15th, 2012, 09:01 PM

^^ A very good debate on FDI in retail

http://www.thehindu.com/opinion/op-ed/article3897915.ece - Rajiv kumar ( secretary general of FICCI)

http://http://www.thehindu.com/opinion/op-ed/article3897906.ece - Devinder sharma ( Agricultural policy analyst)

kongutamizhan

September 16th, 2012, 03:26 AM

For those who oppose FDI I have a question. You people say that supply chain -> no big deal, organizing the sector? -> we can do it, cold storages? -> No problem we got it under control, Food wastages-> arrgh, it can be controlled, Middlemen problems? haah jujoobi to handle.

So as per you guys it is no kambasoothiram or kaamasoothiram. Then answer me this. FDI in retain was not in place for 67 years (and for 20 years in post globalization/modern / technological era). Not an inch moved toward eliminating the barriers in retail. Nothing kept the food prices in check. No policies to help the consumers. Farmers suicides had not stopped. Their livelihood still same shit. இத்தினி வருஷமா கெவேர்மெண்டு இன்னா புடிங்கிச்சி? FDI கொண்டு வரும் போது மட்டும் why திஸ் கொலைவெறி? Where was this kolaveri for so long?

Commies, socialist ideologies, desi corporates, annachis, co-op societies and government supported micro-credits all had their chance. They simply didn't make it work. period. They may have worked in patches, there may be some exceptions, but overall :doh: we miserably failed with the old policy. Time to accept and reflect on the hard reality.

India is too big and we have room for blended solutions. வாயி கிளியர எந்த political பார்ட்டி or ஆபிசர்ஸ்க்கும் பேச தகுதி இல்லை. They simply don't have an alternative plan that is better than this. Even congress is not implementing FDI 100% across the country next day. Nor they are forcing everyone to do it. They are giving a level playing field. So what is the problem?

PS> I know I still owe few technical responses. Little busy with other jobs and further have to dig through few materials related to the retail specific details. So excuse this mokkai post to keep conversation going :)

Arul Murugan

September 16th, 2012, 04:11 AM

Some Facts about FDI in retail....

statistical facts!! :cheers:

Ithuku reveat thara pro-FDI personam yavarum varaliya?? ;)

Arul Murugan

September 16th, 2012, 04:16 AM

walmart vanthavudaney farmer suicide stop ayidum,

cauvery/palar/krishna/godavari la milk and honey oduma?

commies, desis, anachis, gvt 60yrs la kilikathathai, walmart and other super stores vanthu kilichidum.

appo kandipa antha walmart, supermarket giants oru 30000 stores Indiala open pannanum.

kongutamizhan

September 16th, 2012, 04:22 AM

^^ The statistics is Wal*Mart employee only stat, meaning 2.1 million jobs from Walmart. Do you know how many ancillary businesses walmart or any organized retail can create? Hence the argument that walmart alone has to open 18000+ stores for 4 million job is moot. That article is one-sided. And anyways even I think 4 million is a stretch. But it definitely will be around 3.

Interpreting statistics with common sense is what we probably need here ;)

kongutamizhan

September 16th, 2012, 04:49 AM

Study 1 - The Great Indian Bazaar

The most widely circulated in-depth FDI analysis by McKinsey & Co (csi.mckinsey.com/~/media/Extranets/Consumer Shopper Insights/Reports/THE_GREAT_INDIAN_BAZAAR_SECURE.ashx)

It not only analyses the advantages, it also lists out why India is different and MNC retailers can't control the country like they did elsewhere. Look out for LSG and my earlier points, this is what is in detail in this report. Especially read page #24. Indian model of organized retailing will be unique and blended. We will be setting our own model here.

US model will NOT be the model for us. China's is the closest. If you read the document you'll also understand why we also differ from China. In-fact we can be a role model for this blended system and prove the world that small businesses can complement big-box stores. We have an opportunity to lead the world on retailing front. Ours is as complex retail face as that world could get. That's the way I see it

PS> With respect to intentional provoking posts, intentionally choosing not to reply. Let's see how far it gets

kongutamizhan

September 16th, 2012, 05:07 AM

McKinsey report's Exhibit 3.11.

Projection (requirement) of 1.6 million workforce by 2015. And that's just to get started. By this projection CG's numbers look achievable. But I still think 3 million is realistic considering the displacement in jobs.

http://s12.postimage.org/vcqnxdxbx/Screen_Shot_2012_09_15_at_10_02_04_PM.jpg

kongutamizhan

September 16th, 2012, 05:14 AM

After so many years of FDI retail scenario China still has 100 organized retail per 1000 mom-and-pop shops. (Point to remember: They opened up 100%)

Source (http://www.businessworld.in/en/storypage/-/bw/retail-fdi-valuation-is-key/536604.37489/page/0)

According to AC Nielsen, the penetration of organised retailing in India is very small, there are 6 organised retail stores for every 1,000 disorganised stores, there are about 100 in China to every 1,000. Hopefully, FDI will change the balance, but India will have a unique model where bigger stores will coexist with the smaller ones.

Plus, we also get this advantage

Analysts add that technology transfer to Indian companies will enable best practices in crop management, food safety and hygiene, therefore improving the quality of food products across the board. This together with the back end infrastructure development will help the farmers maximize their earnings and value. “The Indian retail players are today bleeding and they will have access to overseas funds which will allow the Indian players to harvest their value and be a partner in the retail growth story,”

Next topic EDI, will do it tomorrow. Getting the right product, at right time in shelf with JIT inventory modeling is what EDI perfects. This alone can reduce about about 1/4th of the wastage

chennaiyorker

September 16th, 2012, 05:19 AM

Guys,

Let's first agree to certain facts here. There are pros and cons to this issue.

- FDI in retail will help in building back-end retail supply chain.

- It will bring in much needed investment and stimulate the economy.

- It will organize the retail sector and increase efficiency and productivity.

But, at the same time:

- FDI in retail WILL displace lots of small farmers and businesses and kill their livelihood.

- FDI in retail is NOT the answer to all the problems we have in our country

- It WILL lead to predatory pricing. Only suppliers with bargaining power will be able to grow and thrive and they will cannibalize the small fish.

- It will also adversely affect our manufacturing sector (just like in the US) as the big retailers will go for goods from low cost countries.

The governments job should be to be mindful of the cons and

- enable co-operatives to be formed for the marginal farmers and suppliers, so they will have bargaining power while fixing price.

- Have strict internal sourcing clause (currently it's at 30% for single brand - have no idea about multi brand). My opinion is that 30% is still less and we can go for upto 50%. After all we have the market - both upstream and downstream to sustain the sector. This will protect manufacturing and suppliers.

- Govt. should also get proactive with growing manufacturing and infrastructure sectors across the country. This will open up employment opportunities for people who get displaced by big corporates.

I do believe that the scare mongering of FDI displacing 50 million people is a little too much. But, over time, there will be significant number of people who will be displaced. This fact is undeniable. The govt. needs to have plan for them. The question here is whether continue status quo for the sake of protecting all small farmers and suppliers and continue to be inefficient and be less productive (Yes, we could do it by ourselves - desi corporates, but even then we will have the same unemployment problem) or change course mindful of the pit falls and avoid them on the way.

I also believe Brazil's model will fit better with India than China's

One word I have for the FDI in retail is - "Caution" and not "solution" as some would think it to be, nor "doom" as some fear it to be. My two cents. Let sanity prevail! :)

kongutamizhan

September 16th, 2012, 05:36 AM

Study 2 - Latin American experience

What happened with Latin America FDI (again and retail deregulation without riders).

While they say that small farmers need to be included more, despite that they acknowledge the benefits. In our case we again have riders in place. I bet Anand Sharma studied several FDI experiments. For starters we do have a better plan to face FDI than any of these countries ever did (including China)

http://www.fao.org/docrep/005/Y4671E/y4671e0f.htm

10.4 Domestic agrifood system change: foreign direct investment and supermarkets[153]

Latin America has experienced nearly the same increase in the importance in supermarkets in the national retail sector in one decade as the United States experienced in six decades, where supermarkets are now about 70 percent of the retail sector. The share of supermarkets in the national retail sectors of three-quarters of the Latin American economy increased from about 15-20 percent in 1990 to 60 percent in 2000. For the poorest one-quarter of the LAC countries, it increased from 5 percent to about 30 percent over the same decade, and is still rising.

http://s14.postimage.org/wnwzq5hup/Screen_Shot_2012_09_15_at_10_31_12_PM.jpg

While supermarkets in the 1970s and 1980s were located in the upper-income neighbourhoods of the largest cities, by the 1990s they were expanding rapidly from those niches into middle class neighbourhoods of big cities, then into intermediate cities, then into towns by 2000.

There has been rapid consolidation and multinationalization of the supermarket sector in Latin America mainly over the past 8 years. Competition for growing markets and increased FDI in the sector, mainly from the leaders Wal-Mart, Carrefour, and Ahold (which are also the top supermarkets in the world), has driven the process. Between 50 and 60 percent of the supermarket sector in Mexico, Brazil, and Argentina (about two-thirds of the Latin American economy) is controlled by four or five firms, three or four of which are multinationals.

Box 10.2 Increased reach of supermarkets

Osorno in southern Chile has three supermarkets on its main plaza, all competing, and nearby Purranque (a town of 25 000 inhabitants) has had its own supermarket for one year. Sixty percent of supermarket sales in Chile are now outside Santiago. Supermarkets have recently been introduced in about 40 percent of the smaller towns in Chile and 30 percent in Costa Rica. Moreover, supermarkets have spread quickly from richer to middle class to poorer neighbourhoods.

Because supermarkets have taken over most of the retail sector in the region, small farms and firms now have to deal with them. Supermarkets are clearly dominant in urban (even town) food markets, and within those, in the most dynamic parts of those markets. Half or more of dairy products and a minority but growing share of fruits and vegetables are being sold through supermarkets. Moreover, whereas urban markets were considered as promising markets for the poor; to sell to these markets now means mainly selling to supermarkets.

Supermarkets are restructuring the agrifood chains from which they buy their products, in several crucial ways.

They impose private quality and safety standards, especially in fruit and vegetable chains, as well to a certain extent in dairy and meat chains. These standards relate to the physical aspects of the products, as well as to cost, delivery and volume requirements. The public standards for such exports tend to be related to phytosanitary conditions of the produce but not the quality of food safety. However, private standards of quality and safety are more ubiquitous and more demanding than the public standards, and perhaps more difficult for small farmers to meet than the public phytosanitary and animal health standards. An example is the private standards for produce, formulated and implemented by EUREP (Euro-Retailer Produce Working Group), an association of the leading supermarket chains in Europe[154]. These include stringent requirements related to agricultural, post-harvest, environment, and labour practices. The equipment, knowledge, management and accounting practices and investments implied by them are costly to small farmers. To the welfare of the small farms of Latin America, supermarket private standards are at least as important as WTO rules and United States public standards.

Their procurement systems are shifting toward contracts rather than wholesale markets, and/or are establishing their own distribution centres, such as the huge Carrefour distribution centre in Sao Paulo serving a market of 50 million consumers). They are also moving quickly on sourcing via national, regional, and global networks (such as Ahold’s new global melon sourcing network). The consolidation of purchases implied by these distribution centres and procurement networks implies more power to impose private standards, and need for larger volumes and/or continuous delivery in individual transactions.

Where supermarkets still rely on wholesalers, such as in Mexico, they have induced change in the wholesale sector, with agroexporter-wholesalers becoming the main intermediaries for supermarkets, skirting traditional wholesalers.

Supermarket chains have themselves become wholesalers and even exporters - such as melon exports by Carrefour via its global sourcing network to Brazil stores and to stores in 20 countries.

There are important implications of the above changes for small farms and firms and thus income and employment opportunities. The main point is that there is a huge potential for the supermarket and fast-food revolutions to exclude - or create markets for - small farms and firms. This potential is much greater than the export market one, simply because the export market is smaller than the domestic market for Latin American farmers, and because small farmers are more able to access, and in general more focused on, the domestic food market.

On the other hand, these changes bring the spectre of exclusion of small farmers. A poignant illustration is that of the experience of ASUMPAL, a farmers’ association in Guatemala detailed in Box 10.3.

Box 10.3 Exclusion of small farmers

For several years ASUMPAL, with some 330 members (about 300 small farmers and 30 medium farmers) was producing roma tomatoes for the Guatemala City wholesale market. However, the over-supply of these tomatoes to the market resulted in 2000 in the association shifting to a contract for salad tomatoes with McDonalds of Guatemala. These contracts had strict private standards with respect to size, appearance, shape, safety, colour of the tomatoes, cost, volume of frequent deliveries, packing materials and temperature of delivered product. These requirements implied in turn the need for large investments in drip irrigation, greenhouses, worker hygiene facilities in the fields, and improvements in their trucks and packing sheds. The small farmers of the association found the investments impossible and dropped out. Membership fell from 330 to 30 in one year! [This is where our population, culture, riders and state level autonomy comes into play to ensure another play (ie) fair play ;)]

This is not just a Latin American situation: the Ahold supermarket chain in Thailand, Tops, recently cut its 250 vegetable suppliers to 50 and is aiming for 10 best-producers. The changes in procurement systems - with the large increase in scale and the increase in system coordination via private standards of quality and safety - are a double edged sword. On the one hand, they increase the market. But on the other hand, they remove the distinction between the export economy and the domestic economy, because standards and even products from the competition are being injected into the local market from the global market by the supermarkets. The supermarket brings global rules of the game and global competitors into the backyard of the local small farms and firms.

Arul Murugan

September 16th, 2012, 05:36 AM

^^ The statistics is Wal*Mart employee only stat, meaning 2.1 million jobs from Walmart. Do you know how many ancillary businesses walmart or any organized retail can create?

example:

Isn't the same story that it will either kill the existing un-organized logistics or count the existing logistics and can claim that new job is created?

Interpreting statistics with common sense is what we probably need here ;)

this applies for those create a myth that FDI in retail will create huge employement.

=======================================================

comparing with 1991 reform is not correct IMHO. That reform created huge employement in manufacturing, IT field because we are not into that business by mass no. 1991 reform changed us from using Ambassador car to Ford, Toyota etc., directly we got the invention in electronics /communication/IT technology to our door steps in the form of cell phones, internet andother house hold electronic items.

kongutamizhan

September 16th, 2012, 05:42 AM

I also believe Brazil's model will fit better with India than China's

No. China model is better than Brazil. Look at the previous post on Latin-American model.

Appears like we learnt the lessons from both and kept a high-entry barrier to give time to small time players. At-least on paper so-far it looks good. SG's can still screw up at local level. Both Brazil and China didn't de-centralize retail but we did. IMO it is a huge plus.

And agree with your other points of government mindful of cons. This is what I have been saying too. This is an excellent tool, whether we create sirpam with it or use to demolish it is in our hands.

Arul Murugan

September 16th, 2012, 05:43 AM

After so many years of FDI retail scenario China still has 100 organized retail per 1000 mom-and-pop shops. (Point to remember: They opened up 100%)

It didn't mention how it has simply displaced the old retailers from down town area of every county-level city.

China could observe those job-less people into mass manufacturing industries and converted them into skilled labour. We have population like china, but manufacturing and job creation cannot be compared.

Further laws are very strict there. In last yr Oppicers there pulled down 13 Walmarts around Chongqing for artificial price hike of meat... but here?? politcos/oppicers will get grocery items worth for 2-3yrs and then they will allow shops to reopen.

kongutamizhan

September 16th, 2012, 05:45 AM

this applies for those create a myth that FDI in retail will create huge employement..

That's your view. Show us the study, prove the myth with detailed analysis.

Also all the best in trying to prove the myths of benefits to customers and food security (just in case if you disagree there too)

chennaiyorker

September 16th, 2012, 05:50 AM

China could observe those job-less people into mass manufacturing industries and converted them into skilled labour. We have population like china, but manufacturing and job creation cannot be compared.

Further laws are very strict there. In last yr Oppicers there pulled down 13 Walmarts around Chongqing for artificial price hike of meat... but here?? politcos/oppicers will get grocery items worth for 2-3yrs and then they will allow shops to reopen.

I completely agree to your points. Without reforms in manufacturing/infrastructure sectors and putting a plug to corruption (via a lokpal bill) this will be a monster that we cannot control in coming years. That's why I'm wary of this, although it has huge potential.

kongutamizhan

September 16th, 2012, 05:52 AM

It didn't mention how it has simply displaced the old retailers from down town area of every county-level city.

China could observe those job-less people into mass manufacturing industries and converted them into skilled labour. We have population like china, but manufacturing and job creation cannot be compared.

Big box retailers in downtown area is not a norm. If China did it then it is their mistake.

Further laws are very strict there. In last yr Oppicers there pulled down 13 Walmarts around Chongqing for artificial price hike of meat... but here?? politcos/oppicers will get grocery items worth for 2-3yrs and then they will allow shops to reopen.

This is not retail sector problem. This is corruption problem. Are you saying root out corruption first before retail reform? Then it's applicable for any reform. I can extend that argument to don't build roads or bridges in the country or don't grant approval to any buildings unless corruption issue is solved.

Why give permission for metro and monorails? As corruption is an issue it is possible that they may build a sub-quality bridges and railroads and people may get killed. So let's stop it and sit next to Anna Hazare whenever he begins his next fast

kongutamizhan

September 16th, 2012, 05:57 AM

comparing with 1991 reform is not correct IMHO. That reform created huge employement in manufacturing, IT field because we are not into that business by mass no. 1991 reform changed us from using Ambassador car to Ford, Toyota etc., directly we got the invention in electronics /communication/IT technology to our door steps in the form of cell phones, internet andother house hold electronic items.

Correct, you got all these only because you gave a chance to reform. What if PVNR had budged to the pressure of left and BJP then?

You will realize all the benefits of this only if you give it a chance.

chennaiyorker

September 16th, 2012, 06:02 AM

This is not retail sector problem. This is corruption problem. Are you saying root out corruption first before retail reform? Then it's applicable for any reform. I can extend that argument to don't build roads or bridges in the country or don't grant approval to any buildings unless corruption issue is solved.

The point is, if government is serious about sustainable growth, they should do it side by side. Bring in anti-corruption laws and implement reforms in manufacturing/infrastructure at the same breath. Just opening up the market, like in 1991, even though it has its upside, will lead to huge corporate corruption and injustice to the common people of India. Look at the scale of corruption after the market was opened up. Walmart does not have a squeaky clean record either. See what they did in Mexico.

We need to be careful folks!

kongutamizhan

September 16th, 2012, 06:02 AM

This nails it. This is what State Governments need to do. They are the best judges and CG for once acted right in giving them the full authority

http://www.fao.org/docrep/005/Y4671E/y4671e09.htm#bm09.4

http://s8.postimage.org/hvk1s5vl1/foodsec.jpg

kongutamizhan

September 16th, 2012, 06:07 AM

The point is, if government is serious about sustainable growth, they should do it side by side. Bring in anti-corruption laws and implement reforms in manufacturing/infrastructure at the same breath. Just opening up the market, like in 1991, even though it has its upside, will lead to huge corporate corruption and injustice to the common people of India. Look at the scale of corruption after the market was opened up. Walmart does not have a squeaky clean record either. See what they did in Mexico.

We need to be careful folks!

There are enough anti-corruption laws in the country. The problem is in its execution, and your financial status (like in vazhakku enn movie). You can stop any reform in the country citing corruption if you want to. So count me out of the corruption angle arguments.

chennaiyorker

September 16th, 2012, 06:10 AM

There are enough anti-corruption laws in the country. The problem is in its execution, and your financial status (like in vazhakku enn movie). You can stop any reform in the country citing corruption if you want to. So count me out of the corruption angle arguments.

I am not for stopping it, but for moving forward with other things in place which will sustain our economy in the long run. Let's not pretend this alone is the solution for all our problems. It needs to be inclusive! In fact I want more from the govt. in other sectors/corruption. just stopping here will do more harm than good.

kongutamizhan

September 16th, 2012, 04:23 PM

Post FDI nod, Wal-Mart keen to open retail stores in India (http://profit.ndtv.com/news/economy/article-post-fdi-nod-wal-mart-keen-to-open-retail-stores-in-india-310884?pfrom=home-business)

kongutamizhan

September 16th, 2012, 05:00 PM

Raise your hands if anyone thinks farmers, or consumers will be benefited by this

http://www.thehindu.com/news/cities/Coimbatore/article3900174.ece

geico2000

September 16th, 2012, 06:12 PM

Some Facts about FDI in retail....

Nice one CY.

Comparing wall-mart workforce with our Indian retail industry doesn't make sense. Walmart in India will definitely need more people. Also we need to see the support jobs created by walmart. When walmart, tesco, metro starts along with Indian biggies, there will be competition right among themselves, which should drive down the prices if appropriate policies exists and executed by the government.

Already farmers are not making much profit, its really very negligible and the lowest in Indian history after the Rural employment scheme. I don't think it can go down than this. As as person from a agriculture background, I don't think the farmer doesn't have anything to loose in this. I have seen Middleman and the retailers taking the bulk of the profit. We make more profit by directly selling to customers than going through these middleman (Ex coconut).

Small example, When valai maran(banana) bears fruit, the viabari(middleman "A") comes to the thopu and after taking a look he says a price for the lot. Usually we do around 5K trees and would have spend Rs 40 for a bunch which has around 60 bananas. So the cost for each banana is 66 paisa .The price Mr middle man quotes is 65 per bunch. So the price we are getting for each is Rs. 1.08. The profit for a bunch is Rs 65. The profit for the entire thopu is 3,25,000 for a year of hard work, which goes to Rs, 27,083/month for a family of five.This profit is by avoiding as much labor as possible. When myself and my cousin brother started getting involved in the farming, we felt that the profit we are making is less compared to the hard work we are doing. So we decided to take a look. We followed the pattern of the business.

The middleman "A" after making a deal with us, goes to the to the mandi (local market) and makes some phone calls to the guys in the big city, the other middleman "B" and settles down a deal based on the market. The price he got for each bunch is Rs 100. A Rs 30 profit for doing the least possible job after his so called expense. Then the truck comes to our thopu and starts cutting the banana bunches. The "B" takes those to the market and starts distributing to smaller retailers "C", each bunch for Rs 150. A Rs 40 profit after his expense. "C" determines the price based on his day and makes a good profit. Wheb we talke to the "C" he said he makes around Rs 30/bunch, which he deserves for his hard work. u

Entha middleman kitta irunthu panan vangurathukulla, apada podum podum nu agidu. Namma kasa kudukurathu, avan etho, donation kudura madri begu pannuvan. You have to run pillar to post to get your hard worked money. As he had given some advance for the initial investment, he will deduct the interest for that too.

So the actual price of a bunch is Rs 65, which is getting sold for Rs 150. We realized that instead of being a farmer it make sense to be a combination of middleman if we had some money. Yes my cousin brother became a Middleman. Now he is making more money than he was doing but not everyone can become a middleman. We need elchavai farmers!.

Here the main participants are farmer, end seller and the consumer. Based on the profit margin of Walmart/Target, I dont think they are making such a margin on selling each product. Their profit is coming from mass selling. So when farmers gets their payment properly for a reasonable price (like Rs 100/bunch), why not?

This is already happening in my village for the last 5 years for sugarcane, peanuts and corn. They give the seeds, ingredients/urea etc. So no investment costs and we have the option to sell to them or to anyone. No contract. Their is a initial agreement on the price of the seeds and other stuff. If we sell to them, its deducted, else we pay them it. No interest or any other thing as he is not able to price match the other.

This is easy for all the farmers and its working well for the customers and the end seller. The only loser is the middleman.

inchennai

September 16th, 2012, 06:48 PM

Nice one CY.

Comparing wall-mart workforce with our Indian retail industry doesn't make sense. Walmart in India will definitely need more people. Also we need to see the support jobs created by walmart. When walmart, tesco, metro starts along with Indian biggies, there will be competition right among themselves, which should drive down the prices if appropriate policies exists and executed by the government.

Already farmers are not making much profit, its really very negligible and the lowest in Indian history after the Rural employment scheme. I don't think it can go down than this. As as person from a agriculture background, I don't think the farmer doesn't have anything to loose in this. I have seen Middleman and the retailers taking the bulk of the profit. We make more profit by directly selling to customers than going through these middleman (Ex coconut).

Small example, When valai maran(banana) bears fruit, the viabari(middleman "A") comes to the thopu and after taking a look he says a price for the lot. Usually we do around 5K trees and would have spend Rs 40 for a bunch which has around 60 bananas. So the cost for each banana is 66 paisa .The price Mr middle man quotes is 65 per bunch. So the price we are getting for each is Rs. 1.08. The profit for a bunch is Rs 65. The profit for the entire thopu is 3,25,000 for a year of hard work, which goes to Rs, 27,083/month for a family of five.This profit is by avoiding as much labor as possible. When myself and my cousin brother started getting involved in the farming, we felt that the profit we are making is less compared to the hard work we are doing. So we decided to take a look. We followed the pattern of the business.

The middleman "A" after making a deal with us, goes to the to the mandi (local market) and makes some phone calls to the guys in the big city, the other middleman "B" and settles down a deal based on the market. The price he got for each bunch is Rs 100. A Rs 30 profit for doing the least possible job after his so called expense. Then the truck comes to our thopu and starts cutting the banana bunches. The "B" takes those to the market and starts distributing to smaller retailers "C", each bunch for Rs 150. A Rs 40 profit after his expense. "C" determines the price based on his day and makes a good profit. Wheb we talke to the "C" he said he makes around Rs 30/bunch, which he deserves for his hard work. u

Entha middleman kitta irunthu panan vangurathukulla, apada podum podum nu agidu. Namma kasa kudukurathu, avan etho, donation kudura madri begu pannuvan. You have to run pillar to post to get your hard worked money. As he had given some advance for the initial investment, he will deduct the interest for that too.

So the actual price of a bunch is Rs 65, which is getting sold for Rs 150. We realized that instead of being a farmer it make sense to be a combination of middleman if we had some money. Yes my cousin brother became a Middleman. Now he is making more money than he was doing but not everyone can become a middleman. We need elchavai farmers!.

Here the main participants are farmer, end seller and the consumer. Based on the profit margin of Walmart/Target, I dont think they are making such a margin on selling each product. Their profit is coming from mass selling. So when farmers gets their payment properly for a reasonable price (like Rs 100/bunch), why not?

This is already happening in my village for the last 5 years for sugarcane, peanuts and corn. They give the seeds, ingredients/urea etc. So no investment costs and we have the option to sell to them or to anyone. No contract. Their is a initial agreement on the price of the seeds and other stuff. If we sell to them, its deducted, else we pay them it. No interest or any other thing as he is not able to price match the other.

This is easy for all the farmers and its working well for the customers and the end seller. The only loser is the middleman.

Middleman is just changing from local to foreign not completely eliminated right?

Instead of having multiple choices now you are limited with less choices? what if walmart failed to buy your products for the price quoted by you?

what ways the consumers are going to benefit, how the costs are decreased for the consumer, anyhow walmart need to transport these produces to the store, store them well and consumer has to travel to purchase the items.

Nothing is going to change except the foreign tag and usage of shopping carts.

ramak27

September 16th, 2012, 06:54 PM

I have never registered my posts in this thread before and FDI in Retail seems to be an topic which is too attractive to resist.

I wanted to bring in some layman terms on understanding the impact of this policy change from the government.

• First, everyone seems to acknowledge that there are problems with the right pricing for the farmers produce. But I fail to understand why this problem has been equated to the retail market. Atleast in the past 30 years, since I have seen a retail shop, farmers produce only made up say 40% of the goods being retailed and that has dwindled even more these years. I can safely say it would be only 25% of the goods are sourced from the farmers in the current year. With the current rate of adoption, I expect the food processing industry to rapidly grow and replace/reduce the share of farmers unprocessed produce even further. So assuming the farmers would be benefitted from these big retail giants, what happens to the rest of the products that are being retailed??

• Let’s take a look at the some of the products being retailed by these giants. For folks who have visited these shop, would acknowledge that only 10% of their floor area is occupied by the farmers produce. Folks who are from India, can take Big Bazaar for example. If there are 5 floors worth of retail space, Big Bazaar puts in farmers produce only in the basement or in an unattractive corner. And even in that area 50% of the space is taken over by the processed foods. Wal-Mart sells anything and everything. Their foot print in US is giving jittery to even the local players. Best Buy, JcPenney or Toysrus is loosing market to Wal-Mart and Target. We can expect hundreds of local furniture showrooms going bust, followed by all these electronic selling shops, what about the thousands of hardware shops that sells anything from paints to cements. I can keep adding and the lists goes on and on. None of the 90% products sold by these retailers have anything to do with the farmers.

• Lets assume that our whole retail sector is in a mess (really??) and the government wishes to fix it. Aren’t we supposed to be finding solutions. What has been done here by the government is to outsource the problem to the foreign companies to come in and take over. Do everyone believe that the Wal-Mart and Tesco will invest funds to understand the problem and work for the benefit of the locals. If government feels that the farm sector needs a boost, it could have simply allowed 49% FDI in farming and legalized corporate farming. Aping the west will need to be done in a controlled fashion.

• In US, Wal-Mart is not allowed to set shop in most large metros. This is basically done, so that majority of the local retailers would be able to survive against the onslaught of these commodity dumping retailers. You could fine hundreds of retailers in downtown NY or downtown Chicago or any other city just making a living based on protectionist move by the local governments. Given the fact that the largest concentration of retail shops are in Urban areas, how does the Indian policy of allowing these large giants to operate only in metros assist. Inherently this policy is designed to benefit the retailer as they get to establish themselves in a niche market where 60%-80% of consumer spending remains.

• The 30% localization component is also dubious. So we are acknowledging openly that the rest 70% could be sourced from the cheapest markets in the world. In China, if Wal-Mart succeeds it will benefit the local populace. The products manufactured in local market is retailed back to them by Wal-Mart. What if these companies decide to import say 30-40% of the commodities from china. For sure the consumer would be benefitted with lower price, but that will be at the expense of local industries.

• Job creation would be a complete myth as the very basis of mega retailing is to lower the operational costs by cutting manual jobs from the back end supply chain and reducing the people required to manage a store. That being the motive it would be hard to believe why these retailers would be interested in providing mass employment as promised by the government.

• Proponents of food wastage due to the rot in transportation and storage facilities fail to acknowledge the fact that the food wastage would continue to happen at a different point with these large retailers. On agricultural produce the large retailers tend to have tons of specifications a produce not meeting the standard is just discarded (say if the skin of the tomato has some black spots). The produce that are un processed also has a shelf life and due the large format of retailing, a substantial portion is stocked in store and discarded after the shelf life. Finally consumers are forced to buy in larger volumes and they in turn tend to stock the extra produce for a few days and forced to trash them when it rots. Probably we would save about 10% of the wastage, but is Wal-Mart retailing produce the only solution to stop wastage.

As KT is battling in lot for the FDI in retail, lets me imagine what would happen if Kovai gets Wal-Mart.
• Kovai with a population of 1,061,447 meets the requirement of city where War-Mart could put a store.
• With over 200 sq km under its belt the it qualifies to have 20 Wal-Mart stores.
• Guess estimate for current retail trade is 20% of the population would be associated in retail (potty Kadai, General store, Provision store, Vegetable& fruit store etc, etc) and its associated industries. If you add the other sectors of clothing, furniture, toys, utensils, electronics, hardware and electrical shops you can get to 30%. So we are talking about 3Lakh people involved in business.
• If consumer spending raises by 5% and Wal-Mart captures 30% of the market share, we are talking about approx 25% of the existing sick domestic retail units going bust. So we might be looking at 75000 ppl losing their jobs.
• Let’s say even if Walmart employs 250 ppl per store, we might only have 5000 ppl employed in 20 stores. Will Wal-Mart of any foreign agency invest capital in retraining these 70000 ppl or will they be left to compete in the tide of capitalistic invasion.
• Another rosy picture would be Wal-Mart decides to import 50% of its retail products from China and south east asian markets, the local producers from textiles to brooms will loose the market. That might in turn put 20000 or more people in the small scale un organized sector out of work.
• With all these, we can expect Wal-Mart to pay local poultry farmers 4Rs per egg because they reduce the middle men and local milk producers to be paid 25Rs per litre or sugar cane farmers can expect to get 2000Rs per ton. I have seen many contract farming practices in and around my village which is about 60km from chennai and there has never been a instance where the farmer gets even 50% of the price when a food processing company or a restaurant places direct orders. The majority of the profit is realized by the entity that enters with an agreement with the farmer.

Please treat me as a novice in this area who does not have the vast knowledge of the pro FDI proponents who seem to understand the complex system named Capitalism.

Arasu

September 16th, 2012, 07:36 PM

I am not sure it would be good for the people or not, but i feel The government should have an open debate with the opposition regarding this. Everyone should provide proof of their claims.

The culture of debate and discussion is totally being shunned by our political leaders,

chennaiyorker

September 16th, 2012, 07:54 PM

@ Ramak27: Very good analysis. I agree to most of your points. However with respect to displacement/unemployment: The displacement of micro and small retailers is inevitable as the sector gets organized with or without FDI (and it will in the future!). Hence, we need not to take only that into consideration to make a case against FDI. The rate of displacement will be slower with Indian retailers taking the market as compared to the foreign retailers. Another point, we cannot continue the status quo - being utterly inefficient and less productive - in the name of saving a part of the bottom of the pyramid. It eventually will happen nevertheless. It's wise to do it sooner than later with some prudent policies. It's imperative that we must make the retail and agri sectors more efficient and productive. The govt. needs to have a plan for re-employment of these folks regardless of FDI or not in the coming years.

Also, WRT the wastage after shelf life: the market will take care of it. If the domestic produce supply is more than the demand/consumption, and if the cost of produce is cheaper than other countries, it will pave way for exports as the retailers like Carrefour/walmart are already exporting produce from Brazil to other parts of the world where demand exists. It will stimulate the economy more, IMO.

The threat from FDI, as I see, is to the manufacturing sector. As the foreign retailers already have a well developed supply chain for everyday home products from low cost countries, they will decimate internal production. If it were Indian companies doing this, their reach in the international market is limited and hence will source more from India. Hence, I believe the support or protest against this should be based on what the govt has proposed with respect to protecting our small industries. Cannot and should not give a blank check to them corporates.

@Geico: As for middlemen, foreign retailers have more potential to take them out as they have big muscles and this will help farmers. And, let's not forget, they will use the same muscles to cut the bottom line and increase the top line as much as possible. This will mean that they will have the bargaining power to pay the farmers and suppliers less once they reach a critical market share. That's the name of the game - Profits! This is good and bad in some ways. Good, as it will force our farmers ad suppliers to increase productivity and efficiency to world standards to be competitive, but also bad as it will make the marginal players drop out as they will not have the resources up their game. Also, if the govt. does not give a favorable environment to the agri and manufacturing sectors to grow and get efficient, it will be doom to the whole sector, as the foreign retailers will go to other countries. say, importing bananas from brazil or thailand instead of here in India.

We can do this with good internal sourcing policies, as this does have huge potential.

kongutamizhan

September 16th, 2012, 09:30 PM

Study 3 Sunk Costs and Opportunities - When Walmart comes to a town

Source (economics.mit.edu/files/7575)

Pre-chain period

http://s14.postimage.org/o8hwbcrch/prechain.jpg

Post Chain Period

http://s8.postimage.org/3zept36hx/postchain1.jpg

When small businesses are affected? Answer > In a market that doesn't grow. Meaning big markets still benefits small businesses. More explanation in my next post when answering Ramak

http://s12.postimage.org/4xntvylj1/sunkcost.jpg

geico2000

September 16th, 2012, 09:45 PM

Middleman is just changing from local to foreign not completely eliminated right?

Instead of having multiple choices now you are limited with less choices? what if walmart failed to buy your products for the price quoted by you?

what ways the consumers are going to benefit, how the costs are decreased for the consumer, anyhow walmart need to transport these produces to the store, store them well and consumer has to travel to purchase the items.

Nothing is going to change except the foreign tag and usage of shopping carts.

Walmart is not the middleman. He is the seller/buyer. He is buying directly from the farmers. Done. Please read my last para.

Why there is not multiple choices. FDI doesn't mean its only walmart. Apart from Indian companies there will be many like TESCO, Metro, Target etc. So competition will be there.

When the middleman is eliminated, if for a bunch of bananas if Rs 70 is removed from the transaction, consumers will definitely benefit. Please read my comment again, where I have deducted transportation costs. All the calculation were done after deducting those.

Are consumers are not travelling to stores now? Dont say they home deliver because the cost is included as part of you purchase. When people buy in bulk they save a lot. So travelling to buy things, is not a big deal.

Foreign tag brings quality and choices to the end user. You might have seen that in front of your eyes. Remember the old Ambassador and chetak. Foreign tag makes the local firms standard to increase and be competitive in the international market. If this is not the case, we wont be selling Mahindra tractors in USA.

kongutamizhan

September 16th, 2012, 09:54 PM

@ Ramak,

When you count jobs, you also have to take into consideration the indirect jobs.

Okay, Chicago is the first and only city in US in its league and size (as a tier 1 metro) that has Walmart within city limits as of today. City of Chicago gave the permission to Wal*Mart to build one on its westside in 2006 overturning the opposition.

And benefits? Here (www.marigallagher.com/site_media/dynamic/project_files/Jan-MG-Updated_.pdf).

After the experiment in its first major city, the retail giant is planning on 2 more stores in Chicago southside and recently Washington DC granted permission to open couple of them in its city limits (http://www.npr.org/templates/story/story.php?storyId=128024414). (They are still fighting in Newyork). This article (http://abclocal.go.com/wls/story?section=news/local&id=8016250) says that WM will create 10000 jobs (direct and indirect) by 2015 .

As you can see in that study as long as one has a growing potential for market retail giants are good and won't affect the small stores as much as it is made out. Indian urban landscape is similar in terms of growing market, population, and different in terms of culture. So take this analysis with a pinch of salt. This is just to point out that big-box retailers can work well in urban areas. I tried to show it with a working example. China example (urban city specific) would have been even better. But I don't have city specific data or study in case of China to counter your Coimbatore example and hence picked Chicago. However you can get a gist of the impact (or lack off) from my earlier mckinsey article where they did a comparative study against China at a higher level. Yes there may be some displacement but benefits will outweigh them overall. The advantage smaller businesses have in a growing market is they have very low if not zero sunk costs

(We still have 700 million people waiting to climb up the income chain and 350 strong middle-class already)

From your example, Coimbatore and vicinity has 2 million population (Chicago has 3 mill). 10 walmarts are not going to spoil retail landscape for small businesses all-around. Read the Mckzee report on why.

chennaiyorker

September 16th, 2012, 10:26 PM

Govt may soon clarify rules on local sourcing (http://origin-www.livemint.com/Industry/F1UnAxBsVIf4k7CCj1B9BP/Govt-may-soon-clarify-rules-on-local-sourcing.html)

New Delhi: After allowing foreign multi-brand retailers to invest in the country, India may also quickly clarify rules that say such companies must buy at least 30% of their material from small local firms to avoid ambiguity.
The so-called local sourcing norms do not currently specify a timeline for domestic operations of overseas companies.
The Foreign Investment Promotion Board (FIPB) could decide on the time to comply with the rules on a case-to-case basis when a foreign investor approaches it for clearance, said an official at the industry department.
“The other option is to find a generic solution to this by fixing a time period for all players,” he said, requesting anonymity. “We are still working on it. But a final decision has to be taken quickly.”
India on Friday said foreign firms such as Wal-Mart Stores Inc., Carrefour SA and Tesco Plc will be allowed to directly hold 51% stake in multi-brand retail chains, but left it to the states to decide whether they want to implement the contentious policy.
The department of industrial policy and promotion (DIPP) should decide on the time allowed to foreign firms to comply with the sourcing rules, former DIPP secretary Ajay Dua said. “Such a policy cannot be decided on a case-by-case basis,” said Dua. “There has to be coherence.”
It will not be unreasonable to ask the firms to comply with the rules right at the time they start operations, Dua said, adding that the Reserve Bank of India may set up a mechanism in consultation with the industry department and the ministry for micro, small and medium enterprises for proper monitoring of implementation of the clause.
The government on Friday made the local-sourcing norms from small firms optional for single-brand retailers but retained it for multi-brand retailers. Swedish furniture firm Ikea, which wants to invest some €1.5 billion in India, had expressed difficulty complying with the rule.
Since supermarket stores would be selling a variety of items, it would be easier for them to source 30% from small businesses even as they start operations, except for multi-brand luxury retail chains or consumer electronics retailers such as Circuit City, according to Arpita Mukherjee, a professor at the Indian Council for Research on International Economic Relations, a think tank.
A bigger problem for multi-brand retailers will be the definition of small and medium enterprises (SME), Mukherjee said. Currently, the government defines these as firms with investment up to $1 million in plant and machinery.
“If a multi-brand player is sourcing from an SME for its domestic and international operations, it may not for long remain an SME,” Mukherjee said. “The present policy prohibits SMEs from growing and becoming a part of global value chain.”

kongutamizhan

September 16th, 2012, 10:38 PM

^^ Circuit city? :lol: do they still exist outside paper? :)

dpitchai

September 16th, 2012, 11:12 PM

Nice analysis ramak27.

chennaiyorker

September 17th, 2012, 12:13 AM

^^ Circuit city? :lol: do they still exist outside paper? :)
:lol: ya...I hear you. may be that lady meant "consumer electronics retailers such as Circuit City and best buy"...and our reporter wanted to shorten her statement without doing due research.

Arul Murugan

September 17th, 2012, 01:51 AM

Very nice post ramak27 :cheers:

I have never registered my posts in this thread before and FDI in Retail seems to be an topic which is too attractive to resist.

I wanted to bring in some layman terms on understanding the impact of this policy change from the government.

• First, everyone seems to acknowledge that there are problems with the right pricing for the farmers produce. But I fail to understand why this problem has been equated to the retail market. Atleast in the past 30 years, since I have seen a retail shop, farmers produce only made up say 40% of the goods being retailed and that has dwindled even more these years. I can safely say it would be only 25% of the goods are sourced from the farmers in the current year. With the current rate of adoption, I expect the food processing industry to rapidly grow and replace/reduce the share of farmers unprocessed produce even further. So assuming the farmers would be benefitted from these big retail giants, what happens to the rest of the products that are being retailed??

• Let’s take a look at the some of the products being retailed by these giants. For folks who have visited these shop, would acknowledge that only 10% of their floor area is occupied by the farmers produce. Folks who are from India, can take Big Bazaar for example. If there are 5 floors worth of retail space, Big Bazaar puts in farmers produce only in the basement or in an unattractive corner. And even in that area 50% of the space is taken over by the processed foods. Wal-Mart sells anything and everything. Their foot print in US is giving jittery to even the local players. Best Buy, JcPenney or Toysrus is loosing market to Wal-Mart and Target. We can expect hundreds of local furniture showrooms going bust, followed by all these electronic selling shops, what about the thousands of hardware shops that sells anything from paints to cements. I can keep adding and the lists goes on and on. None of the 90% products sold by these retailers have anything to do with the farmers.

• Lets assume that our whole retail sector is in a mess (really??) and the government wishes to fix it. Aren’t we supposed to be finding solutions. What has been done here by the government is to outsource the problem to the foreign companies to come in and take over. Do everyone believe that the Wal-Mart and Tesco will invest funds to understand the problem and work for the benefit of the locals. If government feels that the farm sector needs a boost, it could have simply allowed 49% FDI in farming and legalized corporate farming. Aping the west will need to be done in a controlled fashion.

• In US, Wal-Mart is not allowed to set shop in most large metros. This is basically done, so that majority of the local retailers would be able to survive against the onslaught of these commodity dumping retailers. You could fine hundreds of retailers in downtown NY or downtown Chicago or any other city just making a living based on protectionist move by the local governments. Given the fact that the largest concentration of retail shops are in Urban areas, how does the Indian policy of allowing these large giants to operate only in metros assist. Inherently this policy is designed to benefit the retailer as they get to establish themselves in a niche market where 60%-80% of consumer spending remains.

• The 30% localization component is also dubious. So we are acknowledging openly that the rest 70% could be sourced from the cheapest markets in the world. In China, if Wal-Mart succeeds it will benefit the local populace. The products manufactured in local market is retailed back to them by Wal-Mart. What if these companies decide to import say 30-40% of the commodities from china. For sure the consumer would be benefitted with lower price, but that will be at the expense of local industries.

• Job creation would be a complete myth as the very basis of mega retailing is to lower the operational costs by cutting manual jobs from the back end supply chain and reducing the people required to manage a store. That being the motive it would be hard to believe why these retailers would be interested in providing mass employment as promised by the government.

• Proponents of food wastage due to the rot in transportation and storage facilities fail to acknowledge the fact that the food wastage would continue to happen at a different point with these large retailers. On agricultural produce the large retailers tend to have tons of specifications a produce not meeting the standard is just discarded (say if the skin of the tomato has some black spots). The produce that are un processed also has a shelf life and due the large format of retailing, a substantial portion is stocked in store and discarded after the shelf life. Finally consumers are forced to buy in larger volumes and they in turn tend to stock the extra produce for a few days and forced to trash them when it rots. Probably we would save about 10% of the wastage, but is Wal-Mart retailing produce the only solution to stop wastage.

As KT is battling in lot for the FDI in retail, lets me imagine what would happen if Kovai gets Wal-Mart.
• Kovai with a population of 1,061,447 meets the requirement of city where War-Mart could put a store.
• With over 200 sq km under its belt the it qualifies to have 20 Wal-Mart stores.
• Guess estimate for current retail trade is 20% of the population would be associated in retail (potty Kadai, General store, Provision store, Vegetable& fruit store etc, etc) and its associated industries. If you add the other sectors of clothing, furniture, toys, utensils, electronics, hardware and electrical shops you can get to 30%. So we are talking about 3Lakh people involved in business.
• If consumer spending raises by 5% and Wal-Mart captures 30% of the market share, we are talking about approx 25% of the existing sick domestic retail units going bust. So we might be looking at 75000 ppl losing their jobs.
• Let’s say even if Walmart employs 250 ppl per store, we might only have 5000 ppl employed in 20 stores. Will Wal-Mart of any foreign agency invest capital in retraining these 70000 ppl or will they be left to compete in the tide of capitalistic invasion.
• Another rosy picture would be Wal-Mart decides to import 50% of its retail products from China and south east asian markets, the local producers from textiles to brooms will loose the market. That might in turn put 20000 or more people in the small scale un organized sector out of work.
• With all these, we can expect Wal-Mart to pay local poultry farmers 4Rs per egg because they reduce the middle men and local milk producers to be paid 25Rs per litre or sugar cane farmers can expect to get 2000Rs per ton. I have seen many contract farming practices in and around my village which is about 60km from chennai and there has never been a instance where the farmer gets even 50% of the price when a food processing company or a restaurant places direct orders. The majority of the profit is realized by the entity that enters with an agreement with the farmer.

Please treat me as a novice in this area who does not have the vast knowledge of the pro FDI proponents who seem to understand the complex system named Capitalism.

Arul Murugan

September 17th, 2012, 02:06 AM

Even for poor farmers we have "farmer's market" which is very sucessful. Only thing we don't have is "walmart" like AC/credit card/billing system or modern infra like cold storage etc., (but cold storage is coming in big way now due to gvt efforts)

Only the wealthy farmers(who don't engage in the field work directly) and middle man make corporate agreement with the big retailers. Otherwise farmers comes directly from field to sell their farm products directly at old market or present day Uzhavar santhai. Those who have travelled in early morning city buses might have witnessed this in nook and corner of the state. The town bus service starts so early in the state (3:00AM) to ferry the farmer sellers from rural farming areas to old market area of urban.

At many places farmers are directly engaged in trading if the farm products is home grown. The middle man comes only if the lorry transportation involves..

========================================================

Not only Anachi kadai, almost every small retail shops will have the heat from huge retailors... Meat market, fish market, stationary shops, cell phone shops, plastic retailors, small garment shops, flower sellers, wholesale traders on commodoties like rice, spices and other grocery items and many others will be hit by big retailors once they occupy the big space/market.

kongutamizhan

September 17th, 2012, 02:15 AM

Study 4 - Has Wal*Mart buried mom-and-pop?

Covers extensive regression analysis from 48 states in US

Source (www.cato.org/pubs/regulation/regv31n1/v31n1-1.pdf)

CO N C LUS I O N

Our research suggests that the popular belief that Wal-Mart has a significant negative effect on the size of the mom-and-pop business sector of the United States economy is statistically unfounded. After examining a plethora of different measures of small business activity and growth, examining both time series and cross-section data, and employing different geographic levels of data and different econometric techniques, it can be firmly concluded that Wal-Mart has had no significant impact on the overall size and growth of U.S. small business activity.

There is no question that Wal-Mart does cause some momand-pop businesses to fail. However, those failures are entirely compensated for by the entry of other new small business elsewhere in the economy through the process of creative destruction.

robertashok

September 17th, 2012, 06:16 AM

FDI Bill was not cleared by parliament houses, how can the government implement FDI then with the current plan. can somebody make it clear.

murlee

September 17th, 2012, 06:37 AM

FDI Bill was not cleared by parliament houses, how can the government implement FDI then with the current plan. can somebody make it clear.

Because FDI implementation is not a law and hence there is NO BILL NEEDED to be passed in parliament. It is an EXECUTIVE DECISION and hence the prerogative of the Govt alone.

SSCaddict

September 17th, 2012, 07:28 AM

one thing i know is that as long as congress govt is there, then no one can touch farmers as they are their votebank.

robertashok

September 17th, 2012, 07:44 AM

Because FDI implementation is not a law and hence there is NO BILL NEEDED to be passed in parliament. It is an EXECUTIVE DECISION and hence the prerogative of the Govt alone.

From BusinessLine.
==============
While there is no need for legislative approval for allowing FDI in multi-brand retail, there is need for Parliament approval for allowing FDI in pension and also for hiking FDI cap in insurance sector.

robertashok

September 17th, 2012, 10:23 AM

I am just thinking that FDI is just to put hot Coal Block in cold storage.

kannan infratech

September 17th, 2012, 10:27 AM

I am just thinking that FDI is just to put hot Coal Block in cold storage.

Sugira point...a pudichitteenga.

Next is - Farmers kku Oru pudhu Loan scheme from CG., which will be waived just before the LS elections. :)

Keep the people under Opium and smaller pain so that they will not be aware of the Bigger Pains.

kannan infratech

September 17th, 2012, 11:26 AM

ITC has been so far the only Indian Corporate company who are able to understand the local needs and address the same and they do not follow the MNC models but more of Amul model (but no co operative).

They have been really successful in Oilseeds & Tobacco.

But they seem to lose the grip against the Deep pockets of MNCs.

May be the Indian Govt has to encourage the Home Grown and tested models instead of opening up.

http://www.dnaindia.com/money/report_e-choupals-give-itc-a-price-edge_1741076

E-Choupals give ITC a price edge

At a time when most FMCG companies are reeling under rising input costs, made worse by a delayed monsoon, ITC is using its e-Choupal rural network to cut on procurement costs and thus gain on pricing power.

“ITC’s rural network is enabling it to gain procurement advantages on account of direct access to farmers and a strong information network,” said Puneet Jain and Aditya Soman, analysts with Goldman Sachs, in a report.

B Bowonder of Tata Management Training Centre in a report on the company said ITC faced problem of poor quality produce before it launched its e-Choupal initiative.

“With this initiative they have not only been able to procure good quality output but also reduced the cost of intermediation,” he said.

Under its e-Choupal system, ITC sets up a service support system for the farmers through a ‘sanchalak’, uses the internet to disseminate information about price, weather, market and so on. This helps farmers improve their productivity and efficiency, experts said, adding, thus when ITC buys agri-inputs from them they are not only assured of better quality but can also cut intermediaries.

This initiative is also helping the company strengthen presence in the rural market.

“E-Choupals are helping ITC in creating strong connect with villagers and enhancing its supply distribution network. We found an entry-level soap brand, Superia,widely available in the village because e-Choupal sanchalaks were helping in local marketing. E-Choupals are likely to continue to supplement the efforts of the regular trade marketing channel,” said Jain and Soman of Goldman Sachs.

They said better sourcing capabilities has helped ITC increase its EBIT from agri business five times during 2008-12.

In fact, analysts said this will help ITC stem its losses in the FMCG segment. Cigarette maker ITC hopes to break even sooner than the earlier target of 2017.

This is also believed to have given greater pricing power to the company. So when most consumer companies have raised prices, ITC is still holding fort, experts said.

kannan infratech

September 17th, 2012, 11:33 AM

http://www.fao.org/ag/ags/contract-farming/ags-library/detail-fr/fr/?dyna_fef%5Buid%5D=81988

Contract Farming in Odisha: Prospects & Constraints
Author Bikash Rath
Year 2011

Organization Regional Centre for Development Co-operation

Contract farming is one of the illustrated examples of the impact of globalization and liberalized economic policy in the agriculture sector.

While the farm sector is facing an identity crisis amidst growing dominance of the industrial sector, contract farming helped to create a new hope in this scenario. It established a link between the farm sector and the corporate sector too.

This way it created new prospects for the agricultural sector, and added to the dignity of the farmer. However, the actual practice was often not so farmer-friendly.

Rather it was an arrangement to best exploit the farmers’ lands in the interest of the contracting agency. Innocence and ignorance of the farmers, absence of a strong farmer-security mechanism, and tactfully drafted legal papers favoured the other side very much. And the result was quite obvious; farmers suffering in many ways, long-term socioeconomic and environmental threats perceived, and marginality of farmers getting increased.

While hybridization & genetic modification impose a kind of passive ownership over the farmer, contract farming can impose a more direct ownership/control.

Unfortunately, the present situation often puts the farmer in a rather contradictory position since he/she may find contract farming and all other liberalized systems of modern farming much more promising and convenient without realizing much the long term impacts. This is obviously because the policy in this country does not support much the conventional systems of livelihood including agriculture.

Moreover, there has been differential attitude of the government for different regions of the country, often due to political reasons; and this is why Punjab, UP, and Maharastra receive more attention than Odisha, Tripura, or Chhattisgarh.

A brainstorming exercise for effecting a sustainable and farmer friendly policy as well as implementation mechanism is therefore needed to take steps before it is too late; and the present report is but one of the initiatives of RCDC contributing in that direction.

We take this opportunity to announce that findings of this study will be published soon in the local language of out state so that the rural mass, particularly the farmers can understand the issues and make themselves alert.

kannan infratech

September 17th, 2012, 11:40 AM

Contract farming: Carrot or stick?

http://www.atimes.com/atimes/South_Asia/HI13Df01.html

MUMBAI - Against the backdrop of hundreds of farmer suicides in the debt-ridden farmlands of the western Indian state of Maharashtra, big corporations are powering into contract farming - dangling the carrot of a better deal for operators.

According to government estimates, contract farming - which involves farmers cultivating specific crops under a buy-back agreement with a company or agency - will double agricultural exports to US$20 billion by 2010, but some cooperatives fear the agreement will simply reap more misery for farmers. Another

perceived risk is that land currently used to produce staple crops such as rice and wheat will be swallowed up to feed the $3.5 trillion global food-processing industry.

Reliance Industries, Indian tobacco giant ITC, Godrej and Pepsi are discussing major contract-farming projects with the Maharashtra state government.

The Financial Express reported that these companies are targeting rich western Maharashtra, pumping in investments to complete unfinished irrigation dams and canal projects, and to "educate" farmers on changing their crop patterns to reduce their "over-reliance" on sugarcane. They offer jobs, health care and an assured income for farmers.

The Communist party-led government in West Bengal has said that while technology-based foreign direct investment is welcome, it will not allow multinational companies to introduce contract farming in the state.

Generally, the buyer seems fonder of contract farming than the seller. "I have visited Germany and seen the success of contract farming there," C B Holkar, farmer and vice chairman of the New Delhi-based National Agricultural Cooperative Marketing Federation of India Ltd (NAFED), told Asia Times Online. "The misplaced fear among some of our farmers is that their lands are under threat, but contract farming is based only on a better price for the produce.

"We have done some contract farming in Punjab, and it would be wrong to say that farmers are being exploited." However, he himself is a buyer, purchasing contract produce from grape vineyards in Maharashtra's Nashik district.

Tata, India's largest private-sector group (with 93 companies generating revenues of $17.8 billion in 2004-05), says its contract-farming companies will help to educate farmers so they can defend themselves against exploitation, ensuring that they know how to use the Internet and computer software.

But to some the present reality of contract farming seems a lopsided deal. One is Dr Sukhpal Singh of India's leading business school, the Indian Institute of Management (IIM), Ahmedabad, whose study "Contract Farming for Agricultural Development: Experience of the Indian Punjab and Northern Thailand" says this type of farming has not benefited the country's farmers.

Dr Singh observed in his study: "Contract farming, in political economy, is one mode of capitalist penetration of agriculture for capital accumulation and exploitation of the farming sector by agribusiness companies." The new concept, he said, was spawned by trends in marketing, food habits, technology and agriculture in the new economic environment.

The IIM study called for institutional arrangements and legal provisions to protect India's 235 million farmers. The Confederation of Indian Farmers' Associations says 86% of India's farmers own less than 5 acres (2 hectares), compared with US farmers, who own an average of 178.5 hectares.

"The possibility for abuse certainly exists - and it's not all one way," Michael Coleman, managing director of Aisling Analytics Pte (a Singapore-based hedge fund with US$370 million in investments), told ATol. "Many contractors have experienced farmers who take the money/inputs and don't deliver the produce and are then faced with limited or no viable redress or remedy - because of weak legal systems or the power of farmer lobbies."

Coleman says cooperatives can play a major role in ensuring benefits in contract farming that "can potentially allow the agricultural sector to leapfrog decades or even centuries of development".

"In our country, contract farming has considerable potential where small and marginal farmers can no longer be competitive without access to modern technologies and support," said a market-reforms study by the Department of Agriculture and Cooperation. "The contractual agreement with the farmer provides access to production services and credit, as well as knowledge of new technology. Pricing arrangements can significantly reduce the risk and uncertainty of the marketplace."

In earlier decades, Indian farmers could primarily sell to state-owned companies, but the free economy left farmers grappling with soaring fertilizer, seed and pesticide costs as the selling price of their produce nosedived.

Asian countries are turning more and more to contract farming, particularly the Philippines and Thailand. The Export-Import Bank of Thailand wants to finance contract-farming projects, and Myanmar's military junta has invited Bangladeshi interests to join Thai businesses in establishing contract-farming operations in the country.

However, many farmers are unimpressed. Krishan Bir Chaudhary, executive chairman of Bharat Krishak Samaj, a New Delhi-based group that represents 5 million farm families, opposes contract farming because he says international companies will benefit while farmers suffer.

"At the heart of the issue lies a profound ideological question," said Michael Coleman. "Do you believe in free markets or autarky [a closed economy]? Is food security better delivered by economic specialization driven by comparative advantage and free markets, or by protecting domestic farmers? Is Malaysia worse off because it imports rice and wheat and produces palm oil and rubber for export? Should England not have repealed the Corn Laws and still have 40% of the labor force working in the fields? [These are] emotive issues in India."

Indian farmers are asking life-and-death questions, not ideological ones. In its current cover feature probing farmer suicides in Maharashtra, Frontline newsmagazine quotes a distressed farmer in Kshirsagar: "Why is the government willing to import wheat at Rs1,400 [$30] a quintal [100 kilograms] but won't pay its own farmers more than Rs800-900 a quintal? Why do city people and the media raise such a ruckus if the price of onions or tomatoes goes up? Can't they spend Rs50 a month more for their food, so that those producing it don't starve?"

kannan infratech

September 17th, 2012, 11:46 AM

Food Security for India .. WoW !!!. Read this.....

http://www.indianexpress.com/news/a-costly-morality/896714/0

A costly morality?

It is election time, perhaps even time for mid-term polls, after the assembly elections in February. Time, therefore, for a mid-term review of the UPA 2’s policies. Much has been written about the lack of leadership on the part of Prime Minister Manmohan Singh. So in interests of balance and “equal opportunity”, I would like to discuss the performance of the chairperson of the UPA, Sonia Gandhi. Actually, there is more than equality that dictates that her performance be judged — she has been, after all, the major leader of the Congress for almost 15 years.

It was March 31, 1997 when Sitaram Kesri was ousted from the Congress party leadership and Sonia Gandhi assumed leadership. Her political acumen was tested a year later in February 1998. In the general elections, Ms Gandhi was able to garner 141 seats — one more than those obtained in 1996. But this wasn’t really a test of her political leadership because she had only a year to gear up the moribund Congress, a party in steep decline because of the lack of a Nehru-Gandhi at the helm. A year and a half later, in September 1999, there was yet another general election, this one precipitated by Sonia Gandhi’s statement that she was ready to take over the government because she had 273 seats. In the 1999 Lok Sabha, the Congress hit a historical low of 114 seats.

But it wasn’t really a test of Sonia Gandhi’s leadership because in India, coalition politics really determines who wins. In the May 2004 elections, Gandhi chose well and was able to bring up the Congress tally back up to the 1996 and 1998 mark of 145 seats! So a decade after the decline of the Congress, and with seven years at the helm, she was not able to make any difference to the misfortunes of the Congress party. The political record got much better in the most recent May 2009 election, when the Congress-led UPA came back with the solid achievement of 206 seats. How much of this was due to her leadership, and how much due to the solid 8 per cent-plus GDP growth rate, and how much due to Manmohan Singh’s honesty, is a matter that historians will decide. What we do know is that the accelerated GDP growth rate had precious little to do with any policies that the Sonia Gandhi-Manmohan Singh government introduced between 2004-2009.

Indeed, the populist policies that were introduced by UPA 1 sowed the seeds of the economic disaster that India has witnessed since 2008. Our GDP growth rate has decelerated more than most other countries, and there has been more volatility in inflation, especially food inflation, in India than any other country in the world. This volatility has been induced and juiced up by the populist policies of UPA 1 and 2. It is an open question whether these economic policies were the doing of Mr Singh or of Ms Gandhi.

The PM can be blamed for many things, including the unnecessarily tight monetary policy, but it is incredible to think that a fiscal conservative like him approved of the Greece and Venezuela-like populism that has been engineered by Gandhi and her social and economic think (not)-camp called the National Advisory Council. Whether it is loan melas for farmers, destructively high procurement prices for foodgrain, employment programmes or the food subsidy bill, it is Gandhi and her NAC who should get the credit — or the blame.

Words come cheap, so let us look at some facts. Soon after Sonia Gandhi came to power, she introduced the national employment scheme, NREGA. True to expectations, the Congress introduced the employment guarantee scheme as its own invention, so it could ostensibly get political and “left intellectual” credit for caring so much about the poor. Proclaiming morality has always come easy to the hubris-filled chests of the Congress leaders. Never mind that the employment scheme was as old as 1973, when it was first introduced by the Mahrashtra government as a “food for work” programme for the poor. Since then, it had been introduced all over the country as an anti-poverty programme. With economic growth and economic development unknown only to the Congress party leadership, such programmes had declined in importance. Until in-your-face populism was introduced by Sonia Gandhi and the NAC, and expenditures on such programmes averaged Rs 40,000 crore over the last few years.

Today it is acknowledged that the NREGA scheme is rife with corruption. But Sonia Gandhi and the NAC want to introduce the food security bill. Again, much like the “invention” of employment programmes, the Congress believes it is introducing this morality into Indian policy making for the first time.

Morality does not come cheap and maybe accompanied with intolerable corruption. At present, the public distribution scheme (PDS) works as follows — the government procures the foodgrain from the farmer and ostensibly delivers the same to the poor at heavily subsidised prices. The table shows the performance of this scheme in 2004-05 and 2009-10, the two years for which NSS data are available, data that can cross check the government’s claims of expenditure. The first two rows show the discrepancy in terms of tonnes of food that disappear into thin air. In 2004-05, the government claimed to have delivered 41.5 million tonnes to the PDS shops for delivery to the people. Only 13.2 tonnes actually got delivered. The difference, 28 million tonnes, was not delivered to the poor or the rich by the PDS shops. This food went from the PDS shops to the market and the market sold it to the poor at, well, market prices.

We can all take heart from the fact that the situation improved in 2009-10 — now close to half of the food delivered to the PDS shops were bought from these shops. How much got lost? 24 million tonnes. The subsidy value of this taxpayers’ loss, and the gain for so-called middle men and women, was a healthy Rs 30,000 crore. This number closely matches the lower bound estimate of 2G corruption.

Scams like the 2G scam happen once in a decade. PDS corruption goes on every year. And the food security bill will only enhance and glorify this ongoing corruption. To be sure, the bill enhances the moral stature of the Congress, Sonia Gandhi and the NAC. But it enhances corruption even more. Anti-corruption stalwarts like Vinod Rai, or even Team Anna, where are you when we really need you?

The writer is chairman of Oxus Investments, an emerging market advisory firm

kannan infratech

September 17th, 2012, 11:49 AM

http://southasia.oneworld.net/weekend/proposed-food-security-bill-is-worse-than-a-hoax

'Proposed food security bill is worse than a hoax'

Kushal Saini, OneWorld South Asia

Eminent Indian economist Prof Jayati Ghosh says the proposed food security bill is more than a mere hoax; in fact, it would create more food insecurity. In an exclusive interview with OneWorld South Asia, she talks about the various problems that plague the country.

Economist Jayati Ghosh specialises in globalisation, international finance, employment patterns in developing countries, macroeconomic policies, and gender and development-related issues.

She is currently Professor of Economics at the prestigious Jawaharlal Nehru University in New Delhi and is also member of the National Knowledge Commission constituted by the Prime Minister of India in 2005 with the objective of sharpening India’s comparative advantage in the knowledge-driven society.

In an interview with Kushal Saini of OneWorld South Asia, she talks about the problems facing drought-hit India and the need for an alternative development model.

Here are the excerpts:

OneWorld South Asia: There have been reports of several committees in the recent months that talk about the pervasiveness of poverty in India. What is your assessment?

Jayati Ghosh: There is no doubt that we are still a very poor country. I think a lot of the talk that has been going on is about how we are now a global Super Power and we have all these delusions of international greatness. I think they miss the point that our development project is still very incomplete.

It’s not just the income poverty, which, of course, is very widespread. Even if one goes by the government estimate, at least one-third of our population is absolutely poor. But if you take any other indicator we are really not providing minimum conditions of life to at least half of our population – whether it is in terms of basic nutrition, around 60% of our country is undernourished, according to the official statistics, or in terms of basic housing, sanitation, and other minimum things that people would take for granted in any other country. So I think the extent of what would be called poverty in most other countries of the world is much greater in India.

OWSA: Our country is also undergoing a severe agricultural crisis. Farmers are committing suicides in large numbers. Do you think the government is doing enough to revive the agricultural sector? And what needs to be done?

JG: No, I think the government is definitely not doing enough. I mean the problem in agriculture is recognised now for at least five years. And it is a combination of destroying the kind of protection that we have provided, not providing new types of support to farmers and then exposing them to international competition, which is highly subsidised.

So we have really done very badly by our farmers and it is not because the government doesn’t know what to do. There have been many commissions. The farmer’s commission, the most recent of them, set up by the government, gives very detailed recommendations about how to provide minimum support prices, how to ensure grain banks in the villages, what needs to be done in terms of agricultural research, extension, input provision, credit, etc. It has given very detailed recommendations in all of these areas. The government has yet to act on them.

OWSA: After the failed monsoon, large parts of the country are in the grip of drought. Is our food security endangered?

JG: Yes, I believe it is. Because the kharif, which is the season that has been affected by the drought, is precisely the one that provides most of the important food grains like rice and a whole range of other pulses. So definitely we have to be concerned about our food security and the government must immediately engage not just in crisis management for the drought but also in ensuring that we have enough supplies for the future. Because that is when speculative tendencies will emerge.

Thus, there is a need for overall food management and government should take special steps to manage food stocks.

OWSA: What is the government doing vis-a-vis inflation?

JG: The government is looking at inflation as a reflection of the economic slowdown and recession and has therefore reduced interest rates in the last few months. However, now it is arguing that in the wake of price rise, interest rates need to be increased. I feel this is a wrong approach. What the government needs to ensure is that the common man can afford food and other basic commodities.

OWSA: What do you think of the proposed Food Security Bill? Some experts have described it as a hoax on the basis that it is merely a repackaging of existing poverty alleviation schemes?

JG: I think it is worse than that. It’s not a repackaging; it’s a reduction. The note that has been sent to the state governments actually talks about limiting the food security to only households [that are] below the poverty line and reducing the amount provided from 35 to 25 kilograms. So that’s actually much worse.

Currently eight states of the country are providing rice or wheat to about 65-80% of households at Rs 2 a kilo. You are going to raise that price, provide it to lesser [number of] households and reduce the amount given. So it’s more than a hoax. It is actually worsening; it’s creating more food insecurity.

I believe that what we need is a universal programme not something that is limited to [households] below poverty line because we know that many households that are officially above poverty line are food insecure. The only way to ensure that everybody gets minimum nutrition is to provide a universal scheme.

OWSA: What is the extent of the impact of global economic crisis on Indian economy and the people at large? Do you see any hopes for the economy to come out of this recession?

JS: Well, India hasn’t really had a recession. What we had is a reduction in growth rates and to that extent we have been less affected than many other countries. One reason for that is that our financial sector is more protected because we have a large public banking system. And because the Left ensured that the nationalised banks did not get privatised, we have been able to withstand the financial crisis to a large extent.

But we have been very badly affected in terms of exports and capital outflow and that has caused our growth rate to fall. Export employment has been very badly hit and that has had multiplier effect on other employment.

So what I think is the case is that employment has been hit even worse than output. So while the decrease in output has not been as much, the effect on employment has been much worse and that, of course, means that the livelihoods of the poor have been worst affected.

OWSA: Most capitalist countries have relied on ‘trickle down’ effect. But it seems the model is not working. In India, we see the divide between the rich and the poor continues to widen. What model of development do you propose for the country?

JG: The basic premise of ‘trickle down’ theory is that profit-led growth will benefit all sections in the society. However, history has shown that it has not worked. Rather, this growth is unsustainable and consumes a lot of resources straining the environment.

This model, I feel, should be replaced by a strategy promoting wage-led growth, thus generating greater demand and production through increased income.

With editorial inputs from Rajender Singh Negi and Anna Nath.

kannan infratech

September 17th, 2012, 12:01 PM

Pl see the contrast - Kurien vs PC. Then judge yourself.

http://www.firstpost.com/business/kurien-indian-business-reminder-of-the-missing-rural-link-449859.html

Kurien: Indian business’ reminder of the missing rural link

.......................

In his model of business, villagers are the producers and their products, which they own, are sold to the urban, using the tools of a typically urban-centric business.

.......................
The GCMMF also helped the farmers get around the middle men, whose predominance was destructive for the farmers.

For this, the federation established a direct link between milk producers and consumers. Milk producers had the control of procurement, processing and marketing and a professional management was engaged, according to the Amul website.

...............................

In contrast, rural farmers by many other domestic and multinational companies remain just suppliers without much say.

..................................................

Why PC is pursuing FDI in Retail:?

The CPI-M Tuesday accused Finance Minister P. Chidambaram of helping multinationals to escape tax on assets acquired in India and also foreign and Indian companies to avoid tax.

Commenting on the minister's intention to reverse the retrospective effect in tax law, it said this would help Vodafone to avoid paying a tax claim of Rs.12,000 crore on acquisitions in India.

"The other step announced is to review the General Anti Avoidance Rules (GAAR) which was meant to plug the loopholes which enable tax avoidance by companies using the Mauritius route," a CPI-M statement said.

The Communist Party of India-Marxist said "the retrospective provision was in the Finance Bill which was adopted by parliament. No change can now be made without the parliament's approval."

"The minister has set out a neo-liberal package of measures which seeks to reverse the decisions taken by parliament and his own government.

"It is obnoxious to argue that in order to regain 'investor confidence', tax laws should be so amended as to violate principles of national justice in order to provide avenues for profit maximization at the expense of public revenue," it said.

----IANS

kannan infratech

September 17th, 2012, 12:12 PM

A very reasonable attempt on "Study of Organised Retail in India"

http://www.indiafdiwatch.org/fileadmin/India_site/Research_based_brochure.pdf

Conclusion:
After proper deliberations among the member organisation a charter of demands was formalised with the following demands
Enact strict law to ban all corporations in retail.
Cancel all Wholesale Cash-N-Carry permission granted to foreign corporations & immediately stop the backdoor entry of MNCs.
Formulate a National Policy on Retail Trade and Small Manufacturing Industries.
Implement the National Policy on Urban Street Vendors.
Institute Independent Special Task Force comprising representatives of stakeholders to Study on the Socio-Economic-Environmental and Cultural Impact of Corporate Retail.
Enact a law against predatory pricing and anti-competitive actions. Repeal the changes made in Marketing through the APMC Model Act

In the month of June National movement for Retail Democracy worked closely with stakeholders’ organizations particularly of traders, hawkers, farmers, workers and civil society to resist the corporate hijack of retail trade. It was instrumental in intensifying the resistance to corporate retail by facilitating coalitions of stakeholders’ organizations, building Joint Action Committees in Delhi, Mumbai and Bangalore.

kannan infratech

September 17th, 2012, 12:20 PM

Please post current hot topics here and discuss.

I advise that only those topics on Policy decisions which will have a long time or significant impact or excellent referral articles quoted by our forumers are welcome in this thread.

TN AA thread will continue as a Miscellaneous thread.

I will also shift the recent FDI Retail articles to this thread.

Thanks

uppili

September 17th, 2012, 12:55 PM

^^^ Good move Kannan. This thread may lead to quality debate bringing out the intellectuals

kannan infratech

September 17th, 2012, 01:07 PM

^^^ Good move Kannan. This thread may lead to quality debate bringing out the intellectuals

Thanks & Sorry.

The term Intellectual may also mean Snobbishness in this context. I do not want to keep away those who do not write long posts or quote articles. statistics & books or write Good English.

Anyone can discuss provided that they are within the limits and sticking to the respective subject.

I want more participation from the district forumers who are closer to the real place of happening and they can narrate their own experiences wrt Retail.
NRis & City folks are not the only ones who are welcome here.

Vasu

September 17th, 2012, 01:52 PM

Thanks & Sorry.

The term Intellectual may also mean Snobbishness in this context. I do not want to keep away those who do not write long posts or quote articles. statistics & books or write Good English.

Anyone can discuss provided that they are within the limits and sticking to the respective subject.

I want more participation from the district forumers who are closer to the real place of happening and they can narrate their own experiences wrt Retail.
NRis & City folks are not the only ones who are welcome here.

Good! obviously, we are aware of when we read the good sentences could learn a few words.

kannan infratech

September 17th, 2012, 02:02 PM

Encyclopaedia of India Agriculture Marketing

http://books.google.co.in/books?hl=en&lr=&id=kgEwvXWbkawC&oi=fnd&pg=PA271&dq=study+on+Tamilnadu+rural+area+shandys&ots=lQfz2ulwGp&sig=Dy7jjUHGX7f6P-oF9Oc3Aray3rE#v=onepage&q&f=false

kannan infratech

September 17th, 2012, 02:27 PM

GoTN's State Agriculture Plan :

http://agritech.tnau.ac.in/govt_schemes_services/pdf/nadp_sap2.pdf

kannan infratech

September 17th, 2012, 02:31 PM

AGRICULTURAL MARKETING INFRASTRUCTURAL FACILITIES IN INDIA – STATE WISE ANALYSIS

M.S.Jairath*

http://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=6&cad=rja&ved=0CEUQFjAF&url=http%3A%2F%2Fwww.cosamb.org%2Fdownloads%2FMISINDIA-Cosamb(F).doc&ei=uBZXUPWWD8zJrAfd94DgDw&usg=AFQjCNFOB7rOMXoB2f1xPvaxVScbebuMFA

kannan infratech

September 17th, 2012, 02:35 PM

http://agrariancrisis.in/2011/12/01/selling-india%E2%80%99s-retail-wholesale/

Selling India’s retail wholesale

S. Gurumurthy

http://expressbuzz.com/finance/business/Selling-India%E2%80%99s-retail-wholesale/337135.html

Finally, FDI in retail has arrived. The collapse of the Rupee by one-fifth in just weeks, dwindling forex inflows and net FII outflows have forced a desperate government to sell India’s retail trade wholesale. Corporate and multinational lobbying to induct FDI in retail, branding it as “big ticket reform”, has been intense in the last few years. The lobbies have won. India has lost. The decision betrays a metropolitan bias; and exposes lack of understanding of India’s agricultural and rural economy. That it will endlessly damage the huge 1.2 million strong community-run retail business in India is undisputed. But the less known truth is that it will destroy food security in rural India. How? Read on.

The principal lobby argument for FDI in retail is that the deep pocket and expertise of Walmarts to establish supply chain will make rural areas and farmers prosperous. It does not need a seer to say how illiterate those who advocate this view are about rural India. The report of the “Working Group of the Planning Commission on Agricultural Marketing, Infrastructure, and Policy Required for Internal and External Trade” for the XI Five Year Plan [2007-12], read along with the 19th Report of the Standing Committee of Parliament on Food, Consumer Affairs, and Public Distribution [2006-07] submitted to Parliament draws the true picture of the rural/agricultural India. Compare the farms in India with those in the West. A total of 58.8 million of small and marginal farming families, that is over 32 crore rural people, live on farming in India. Their farm size is 5 acres or less. In contrast, in Canada, it is 1798 acres; in US, 1089 acres; in Australia, 17975 acres; in France, 274 acres; in UK, 432 acres. The US farm size is 250 times larger than the Indian; the Australian farms, 4000 times! Therefore, Farm Gate to Walmart supply chain that works in the US/West cannot be imagined here. Now look at how – and how much of – the Indian farm produce is brought to the market.

The Farm Gate to Walmart theory is founded on the elimination of not only middlemen but also small farmers by making farming contractual and corporate to reap economics of scale. It ignores global studies and Indian experience that affirm that economics of scale does not operate in agriculture. Actually smaller farms gives better production. The SMFs in India farm about 34% of the cultivated area, but produce 41% of food grains; their productivity is 33% higher. Replace small farms by large ones. Nation’s food production will instantly fall by 7%. Not just food. SMFs produce most of the 100.9 million tons of milk. So, unless half the rural population is done away with, small farming cannot be dispensed with. The Working Group concluded: “The small and marginal farmers are certainly going to stay for a long time in India – though they are going to face a number of challenges. Therefore what happens to small and marginal farmers has implications for the entire economy”. More critical is that what SMFs produce, they consume and share with the farm labour; they have no surplus to sell. See how Walmarts will destroy their food security.

A less known, stunning truth about rural India is that more than 60% of India’s food production does not enter commercial stream at all, but gets distributed, consumed within the villages. It is retained or stored by farmers for consumption, payment of wages in kind to farm labour; and for use as seed and feedstock for animals; for sale within the village. Even if a small part of the 60% un-marketed food production is drawn into the market through supply chain which Walmarts will establish, that will mean urban pricing in rural areas. Can SMFs and landless labour afford the market price and buy their food? Never. If that happens, will that what happened Alfanso mango in Konkan and Kerala fish not happen to rural food also? The Konkan people see, but don’t eat Alfanso but only export it for high prices and spend that money on urban goods. And the Kerala fishermen fish and export it at high rates, get cash and drink foreign whisky! The FDI in retail undoubtedly puts at risk, t he food security of SMFs and agriculture labour who who constitute 2/3 of India’s population, as the supply chain of Walmarts will make Alfanso out of the basic food grains in rural areas.

How does the marketable surplus of 40 percent of food produced by Indian farmers cross the village borders and enter the market? Nine out of ten tons [35%] of the surplus [of 40%] that enters the commercial stream enter the market through traditional Haats, Shandies, Fairs whose number is estimated at 47000. Only the balance of 5% directly enters the 6359 traditional wholesale Mandis organised under government supervision. Here begins the modern market economy where the surplus 40% of national production gets traded. This is from where the government procures and stocks food for the nation!

How do the Haats/Shandies function? Some 3/4th of them are held once a week; 1/5th twice a week; 1/20th on daily basis; one Haat covers some 14 villages; all put together cover almost the entire 6.58 lakh Indian villages. Some 2/3rd are held at 16 km from the villages; 1/4th at between 6 and 15 km; a tenth at less than 5 km. More than a third of the buyers walk to the Haat; 1/3 use bicycle; the rest use bullock carts, even motorised vehicles. According to the Working Group, at the Haats, the farmers not just trade, but also exchange social and cultural information about neighbourhood areas, settle marriages and disputes, make crop choice and discuss resource allocation. Therefore, the Working Group recommended that instead of asking the farmers to come to government for knowing what they should do and should not, the government should open its offices at the place where millions meet at the Haats. Now, by its retail FDI policy, the UPA government expects Walmart to go where the Planning Commission Working group had asked the government to go! See how the agricultural India is far removed from even the government. National Sample Survey data shockingly reveals that 7 out of 10 Indian farmers had not even heard – yes not even heard – of the Minimum Support Price [MSP] announced by the government with lot of fanfare; 81% of the those who have heard of it do not know – yes do not know – how to use it! This is because the MSP system operates only in Wholesale Mandis, not at Haats. That is why the Working Group wants the government to go to Haats. The Standing Committee rightly asked the government ‘how will farmers who do not know what MSP is, make use of futures market’. The government, which had no answer, finally banned forward trading in foodgrain.

QED: Thanks to FDI in retail, twelve million community-run retail shops are in danger; and rural food security at risk. This is UPA government’s gift for 2012 and onwards.

kannan infratech

September 17th, 2012, 02:38 PM

http://agrariancrisis.in/2011/11/29/who-gains-from-fdi-in-retail/

WHO GAINS FROM FDI IN RETAIL?

Sukhpal Singh

With the Union Cabinet deciding to allow 51 per cent foreign direct investment (FDI) in multi-brand retail on Thursday the way has been cleared for the entry of global supermarket giants in India. There are doubts and fears amid hopes for long-term gains

ONE of the conditions for 51% FDI in multi-brand retail proposed is that the players will source at least 60% of their farm produce requirements from small farmers. A small farmer is defined as one with up to 10 hectares. It is important to understand implications of FDI in food retail for various stakeholders.

The more important questions to be asked on the issue of FDI in retail are: Does it really help farmers or small farmers? Does it improve efficiency of food supply chains and help lower food inflation which India is grappling with? And of course, how does it impact traditional food retailers’ livelihood?

Small farmers may not gain

The operations of domestic fresh food supermarkets in India have not made any difference to the producer’s share in the consumer’s rupee so far (one of the arguments of the DIPP discussion paper for permitting FDI in retail) other than lowering the cost of marketing of the producers as supermarkets have collection centres in producing areas unlike the Agricultural Produce Market Committee (APMC) markets (mandis) which are in distant cities.

But these supermarkets will buy only ‘A ‘grade produce, that too on open market-based prices, and only a part of the output of farmers, who end up going to an APMC mandi to dispose of the remaining/rejected produce. The chains procure from “contact” farmers without any commitment to buy regularly as they do not want to share the risk of growers. Thus, the involvement of supermarket chains with producers is low and there is no delivery of supply chain efficiency as many of them have already wound up e.g in Gujarat.

Supermarkets and malpractices

Though the move to open up Indian markets to foreign retailers is meant to benefit small farmers, the condition of having 10 hectares of land will leave most of them out. There are other problems too:

Domestic supermarket performance so far does not give any hope that FDI-driven supermarkets will be any different in terms of benefits to small farmers
Buying and selling power of supermarkets due to market concentration will come in the way of benefits to farmers and consumers.
Traditional retailers will suffer a loss of livelihood due to competition from supermarkets
Many malpractices by supermarkets will not let farmers benefit
Supermarkets do not lead to lower food prices if we see global evidence.
Key policy initiatives

Until now only 51% FDI in single-brand retail and 100% FDI in wholesale cash and carry trade was allowed. The paper put up by the Department of Industrial Policy and Promotion (DIPP) for public discussion and comments in mid-2010 and the 2010-11 Economic Survey had argued for FDI in food retail trade in India. In mid-2011 an inter-ministerial group also recommended FDI in retail to control food inflation. The following policy initiatives can be taken to safeguard the interests of local stake-holders:

Slow down food supermarket expansion through mechanisms like zoning, business licences and trading restrictions.
Strengthen competition laws and regulation of supermarkets
Give legal protection to farmers and suppliers as is done in Japan
Permit only formal contract farming, not ‘contact’ farming
Set up an independent retail commission to supervise and regulate supermarkets to protect interests of suppliers, consumers and labour and support to local retailers and farmers
Establish multi-stakeholder initiatives in food value chains and provide support to small producers and traditional food retailers.
Producers’ organisations and the NGOs need to monitor and negotiate more equitable supply contracts with the supermarkets.
Government should encourage producer companies and farmers’ co-operatives for collective bargaining with supermarkets

The noise about benefits to small-holders in high-value crops (read fruits and vegetables) due to supermarket linkages is exaggerated as these crops account for only 2% of the gross cropped area, and the direct linkage is either absent or pretty weak. This is not likely to change even with FDI in retail.

Further, due to the sheer size and buying power of foreign supermarkets, the producer prices may be depressed. In the UK there was a negative relation between the relative market share of a supermarket and the price paid to the suppliers in relation to the average price. The UK supermarket chain Tesco paid its suppliers 4% below the average price paid by retailers.

There have been a large number of supermarket malpractices across the globe which include payments to be on the supplier list (listing fees), threats of delisting if the supplier price is not low enough, payments and discounts from suppliers for promoting/opening new stores, rebate from producers as a percentage of their supermarket sales, minus margins whereby suppliers are not allowed to supply at prices higher than the competitor price, delayed payments, lowering prices at the last minute when the supplier has no alternative, changing quantity/quality standards without notice, just-in-time systems to avoid storage/inventory costs, removing suppliers from the list without good reason, charging high interest on credit, using tough contracts and penalties for any failure to supply.

If it is not misreported, the limit of 10 hectares is laughable as there are hardly 1% farmers who have more than 10 hectares of land. Thus, putting this condition is no good as it is too broad and covers 99% of farmers and, therefore, does not differentiate among farmers at all. Even if it is assumed that it is 10 acres (4 hectares), it will be more than 94% of all farmers (2005-06). How does this conditionality help really small-holders in whose name the permission is being granted? The retail players may work with the top layer (5%) of these farmers and still meet the conditions.

Small retailers to be hit

The supermarket expansion also leads to employment loss in the value chain as compared to 18 jobs created by a street vendor, 10 by a traditional retailer and eight by a shop vendor in Vietnam, a supermarket like Big C needed just four persons for the same volume of produce handled. Metro Cash & Carry employed 1.2 workers per tonne of tomatoes sold in Vietnam compared with 2.9 persons employed by traditional wholesale channel for the same quantity sold. The spread of supermarkets led to 14% reduction in the share of “mom and pop” stores in Thailand within four years of FDI permission. In India 33-60% of the traditional fruit and vegetable retailers reported 15-30% decline in footfalls, 10-30% decline in sales and 20-30% decline in incomes across the cities of Bangalore, Ahmedabad and Chandigarh, the largest impact being in Bangalore, which is one of the most supermarket penetrated cities in India.

Another proposed condition is that FDI in retail will be permitted in all cities with a population of more than one million. The question to be asked is: How many cites in India are really below one million population and how long? Further, given the size of the supermarket retail stores, they may be located in one city but their coverage in terms of potential clientele will extend to neighbouring towns as well.

Impact on food inflation

So far as the role of FDI-driven food supermarkets in containing food inflation is concerned, the evidence from Latin American (Mexico, Nicaragua, Argentina), African (Kenya, Madagascar) and Asian countries (Thailand, Vietnam, India) shows that the supermarket prices for fruits and vegetables and other basic foods were higher than those in traditional markets.

Also, the lower procurement prices through direct procurement from farmers need not lead to lower consumer prices in supermarket chains as procurement prices are more about the bargaining power of buyers and suppliers. Even if it is accepted that supermarkets are able to offer lower prices, the low-income households may face higher food prices because of reasons of distance from supermarkets, and higher prices charged by supermarkets in low-income areas. Thus, there is no direct correspondence between modern retail and lower food prices and, thus, better food security of the poor consumers. Therefore, the inflation containment logic for FDI in food retail does not stand ground given the empirical evidence from across the globe.

Thus, supermarkets would lead to the concentration of market power, with upstream suppliers facing buyer power in terms of lower prices and consumers (buyers) facing higher prices due to lower competition, besides traditional retailers suffering a decline in their business.

Need for regulation

The biggest fear in India is not that FDI in retail per se is worse than domestic corporate investment for farmers or traditional retailers; it is that there may not be adequate institutions and effective governance mechanisms to regulate and monitor operations of the global retailers.

If the monitoring of wholesale ‘cash n carry’ stores so far is anything to go by, there is no regulation and the norms are flouted openly at the store level by the existing players. They are found to do retail sales in the grab of wholesale as the size of a single purchase (minimum ticket size) was just Rs. 500 or Rs. 1,000 which does not seem to be governed by any regulation.

Given the global and Indian experience of supermarkets so far, it is important to slow down food supermarket expansion by mechanisms like zoning, business licences and trading restrictions. Further, there is need to limit buying power of the supermarkets by strengthening the competition laws like the legal protection given to subcontracting industries in Japan in their relations with large firms. These provisions are monitored by the Fair Trade Commission. If contract or “contact” farming is only another name for subcontracting prevalent in industry, then it is only logical to extend such legal provisions with necessary modifications to farming contracts.

Also, provisions for legally binding and clearly worded rules for a fair treatment of suppliers and an independent authority like a retail commission to supervise and regulate supermarkets are required. This authority should ban the buying of products below cost and selling below cost, improve local traditional markets for small growers, delay the pace of supermarket expansion, establish multi-stakeholder initiatives in the chains and provide support to small producers and traditional food retailers.

Producers’ organisations and NGOs need to monitor and negotiate more equitable contracts with supermarkets. The government should play an enabling role through legal provisions and institutional mechanisms like helping farmer co-operatives, producer companies and producer groups to facilitate the smooth functioning of supermarket linkages and avoid ill-effects.

The writer is a Professor, Institute of Economic Growth (IEG), Delhi. Email:sukhpal@iegindia.org

kannan infratech

September 17th, 2012, 02:40 PM

http://agrariancrisis.in/2011/11/27/qa-vandana-shiva-retail-fdi-is-not-about-investment-but-market-grab/

Q&A: Vandana Shiva ‘Retail FDI is not about investment, but market grab’

Q&A: Vandana Shiva

The Cabinet’s decision to allow up to 51 per cent FDI in multi-brand retail was taken without consulting the states, activist Vandana Shiva tells Sreelatha Menon.

Three years ago, you had campaigned against FDI in retail. But, with the Cabinet’s decision to open the sector to foreign chains, it has been made a reality. Do you accept it now? You have been silent on the issue.
It is still wrong, and many times over so. First, the model of FDI in multi-brand retail has completely failed. The failure has been established in the West. Why else do you have the Occupy Wall Street protests? Also, the decision was taken by the government on the third day of the Opposition demanding action on price rise and the economic crisis. The government seems to be saying, “We don’t care about Parliamentary democracy”. As far as I am concerned, I am writing to the states to improve the understanding on implications of the Cabinet’s decision. The media has been silent, too. In fact, it has been celebrating it, as if it was a big achievement.

One of the reasons in its favour is it would cut wastage and create a cold chain.

In the last one year, I wrote foreword to many books; most were on the wastage in the giant retail model. There is 50 per cent wastage. That India records 40 per cent wastage of food is a lie. It is another matter that the Prime Minister is allowing grains to rot by not picking them up.

How can there be wastage in big retail?
About 50 per cent of the wastage is at the farm level. If you order bread from a bakery, the baker has to stock it all day, and throw what is not sold.

But isn’t it supposed to help farmers, since 30 per cent of the procurement is local?
That is another lie. They call small retail ideological. But it is a reality in this country. The entry of Walmart and the likes started only after India inked the knowledge agreement on agriculture with the US.

As for farmers, if Monsanto’s entry led to a quarter million suicides, Walmart would pave the way for more. The model thrives on making everyone reduce margins, till none exist at lower levels. People reduce their margins till they go out of business. Besides, the criterion for 30 per cent local procurement qualifies businesses below $100 million. That is not small-scale in India!

Also, their model is to use five companies for two years, and then abandon these for new ones.

What would be the implications on labour? Won’t it create jobs?
Why is Walmart importing 80 per cent of what it sells in the US from China? Walmart can’t exist where there are labour rights. They had to leave Germany. As for jobs, the difference between India and the US is we have surplus labour. However, the irony is displaced farmers would not find jobs in these shops. They get educated kids. The poor migrants here can then resort to crime.

What about cold chains and backend infrastructure, which would come with retail FDI?
Does our country lack backend infrastructure? It is decentralised and distributed across the country. If there is a functional village haat or a local mandi that is backend infrastructure, they want to centralise these.

Walmart, for instance, entered India on cash-and-carry five years ago. What backend infrastructure have they created so far? If they couldn’t in five years, what can any of these companies do now?

But hasn’t China benefited from FDI in retail?
Yes, their domestic retail has doubled. But the truth is there was not a shop there. You are comparing a country with zero retail with India, which has a 400 million strong retail force.

The Cabinet decision is not about investment, but market grab. It is the Macaulay effect: You feel inferior and thus, succumb to anything that comes from outside, even if it is worthless.

Why do you call it market grab?
The whole unemployment crisis in the West is due to the model of centralised procurement by a few big players. If the big retailer is to import all medicines from China, our pharmacists would shut shop. Our electronics shops would shut shop. People would go to the big retailer to get cheaper stuff. In the 80s, the difference between retail and wholesale prices was six per cent, which rose to 50 per cent six years ago. With FDI in retail, 98 per cent would go to retail and just two per cent to farmers.

But no state or party has objected so far.
This is because states have not been consulted. It is so undemocratic. And, the Opposition has been tricked when it was not prepared for it. It shows the government refuses to learn a lesson from what happened to Europe and the US. It is an insult to the nation.

Have you been supporting the Anna movement?
I have known Anna since 1984, and his work in Ralegan Siddhi is great. In April, I told him the challenge is to join the energy of existing movements. It is focused on one law. It should be a set of parallel movements, with each member taking up a cause. Maybe, (Arvind) Kejriwal can take up Lok Pal and someone else can take up another issue. Public support can be channelised to many issues to create a nationwide movement for change on many fronts.

Critics have said the Rashtriya Swayamsevak Sangh (RSS) has been driving the movement. Do you agree?
No, that is not true. The RSS has not been able to keep up with issues and is out of touch. If it wanted to do something, it would do it on its own. It is a coming together of many people from different movements. I was called for their first meeting in January, but wasn’t able to make it. And, there were people from across the spectrum — from Ramdev to activists.

Would you join them?
No. I don’t jump into any bandwagon.

kannan infratech

September 17th, 2012, 02:43 PM

http://agrariancrisis.in/2011/12/01/fdi-in-retail-whom-are-you-kidding-mr-pm/

FDI in retail: Whom are you kidding, Mr PM?

Devinder Sharma

In India, it is markets that sustain the farmers and not subsidies. We are therefore importing a failed model from America.

Prime Minister Manmohan Singh projects FDI in retail as a boon for the agricultural sector. Unfortunately, if you examine the realities, it will spell a death knell for farming. It will be the beginning of an end for Indian farmers.

It has happened in the United States. Ever since big retail – dominated by multi-brand retailers like Wal-Mart – entered the market, farmers have disappeared, and poverty has increased. So has hunger.

Today, not more than 700,000 farmers remain on the farm in America. Poverty has grown, and hunger has broken past 14-years record.

In Europe, despite the dominance of the big retail, every minute one farmer quits agriculture. This is because farmer’s income across US/EU is on a downslide.

According to a report, farmer’s income in France has come down by 39 per cent in 2009, having already slumped by 20 per cent in 2008.

More recently, in Scotland, low supermarket prices are being cited as the reason for the exodus of dairy farmers.

Low supermarket prices in Scotland have forced irate farmers to form a coalition called ‘Fair Deal Food’ to seek better price for their farm produce.

Studies have shown that Tesco has paid producers 4 per cent less price than the average prevailing in the open market.

It is therefore futile to expect the supermarkets rescuing farmers in India.

Despite the destruction of farming globally by the supermarkets, the Ministry for Commerce and Industry is gung-ho about the virtues of foreign direct investment in multi-brand retailing, which means allowing the big players like Wal-Mart and Tesco to swamp the Indian market.

“The agriculture sector needs well functioning markets to drive growth, employment and economic prosperity in rural areas,” says a discussion paper drafted by the Department of Industrial Policy and Promotion.

I find a number of economists and researchers singing chorus of praise for the role the supermarkets can play. But the entire hypothesis is based on a deliberately prepared flawed basis.

Do the supermarkets really benefit? Since 2006, India has allowed a partial opening up of the retail sector. Has these retail units benefited the Indian farmers and for that the consumers? The answer is no.

The argument is that the supermarket chains will squeeze out the middlemen thereby providing higher prices to farmers and at the same time provide large investments for the development of post-harvest and cold chain infrastructure.

All these claims are untrue, and the big retail has not helped farmers anywhere in the world.

Even in Latin American countries, including Brazil, Argentina, Uruguay and Colombia, where supermarkets, most of them owned by multinational giants, now control 65 to 95 per cent of supermarket sales, farmers have been forced to quit agriculture.

If the supermarkets were so efficient and provided dynamism, I would like to know why the US is providing a massive subsidy for agriculture.

After all, the world biggest retail giant Wal-Mart is based in America and it should have helped American farmers to become economically viable.

But it did not. American farmers have instead been bailed out by the government, providing a subsidy of Rs 12.50 lakh-crore between 1995 and 2009, and this includes direct income support.

And that is why the American farmers are being supported in the form of direct income support by the American government.

It is the massive farm subsidy that supports agriculture in the US. If this subsidy, classified under Green Box for WTO calculations, is withdrawn (as analysed by UNCTAD-India), US agriculture collapses.

A latest 2010 report by the Organisation for Economic Cooperation and Development (OECD), a group comprising the richest 30 countries in the world, states explicitly that farm subsidies rose by 22 per cent in 2009, up from 21 per cent in 2008.

In just one year in 2009, these industrialised countries provided a subsidy of Rs 12.60 lakh crore to agriculture. And it is primarily for this reason that the farm incomes appear lucrative.

Left to big retail alone, European farmers would have packed up by now.

In India, it is markets that sustain the farmers and not subsidies. We are therefore importing a failed model from America.

A latest 2010 report by the Organisation for Economic Cooperation and Development (OECD), a group comprising the richest 30 countries in the world, states explicitly that farm subsidies rose by 22 per cent in 2009, up from 21 per cent in 2008.

In just one year in 2009, these industrialised countries provided a subsidy of Rs 12.60 lakh crore to agriculture. And it is primarily for this reason that the farm incomes appear lucrative.

Left to big retail alone, European farmers would have packed up by now.

In India, it is markets that sustain the farmers and not subsidies. We are therefore importing a failed model from America.

An illusion is therefore created as if the supermarkets have removed the middlemen from trading.

But in reality, the big boys now share the commission between them. The new battery of middle-men, who replaces the traditional middle-men, are the quality controller, certification agencies, packaging industry, processors, wholesalers etc.

Do supermarkets help remove poverty? Based on biased studies by the consultancy firms and some institutes, the government believes that supermarkets will create employment and therefore help in ameliorating poverty.

This too is flawed assumption. Lessons need to be drawn from a 2004 study done by Stephen J Goetz and Hema Swaminathan of the Department of Agricultural Economics and Rural Sociology, at Pennsylvania State University in the United States.

The authors measured the impact of Wal-Mart’s massive retail boom on poverty in various American states.

In this eye-opening study, entitled “Wal-Mart and Poverty”, the comprehensive study clearly brings out that those American states that had more Wal-Mart stores in 1987, had higher poverty rates by 1999 than the states where fewer stores were set up.

“Equally important, the counties (districts) which built new Wal-Mart stores during the period 1987 to 1998 also had high poverty rates,” the report concludes.

Interestingly, increased poverty growth from Wal-Mart operations comes at a time when poverty rates nationally in America were otherwise going down.

Claims by the big supermarkets to be driving economic growth by creating thousands of jobs have been exposed as a sham.

In UK, it has now been shown that supermarket chains like Tesco and Sainsbury have failed to live up to their promise of creating thousands of jobs and thereby driving up the economy.

In the past two years, Tesco had promised to create 11,000 jobs and Sainsbury another 13,000.

Tesco had created only 726 jobs, while Sainsbury actually terminated the services of 1600 of its existing employees, leaving 874 people unemployed.

How do we expect Tesco/Sainsbury to create additional employment in India when they have failed to stand up to their commitment back home?

Big retail does not create additional employment but actually destroys the existing employment. Here is a comparison which should help remove the wool from your eyes.

The Indian retail market is estimated to be around $ 400 billion with more than 120 million retailers and employing over 400 million people.

On the contrary, the US-based giant Wal-Mart, a global leader in big retail, also has a turnover of US $400 billion and employs only 2.1 million people. Which one of these retail systems provides employment is crystal clear.

If you think Wal-mart is here to create employment opportunities you must be living in a fool’s paradise. Simply put, they are investing in India to make money.

I don’t know how therefore economist, policy makers and the ministers can think that big retail will provide employment while the evidence from across the world shows that big retail has displaced millions who are already employed.

Are we not deceiving the nation by presenting wrong facts?

At stake is the livelihood security of tens of millions of hawkers, small traders and farmers.

How can any sensible government that claims to work for the aam aadmi actually bring in massive destruction of livelihoods in the name of foreign direct investment?

Why is our government so keen to pull out the US/EU economy from recession and in turn push India into a headlong depression?

kannan infratech

September 17th, 2012, 02:52 PM

The Wall Mart True Success Story :?

http://aese.psu.edu/research/centers/cecd/research/wal-mart-and-county-wide-poverty/full-study

Wal-Mart and County-Wide Poverty

Stephan J. Goetz and Hema Swaminathan
Department of Agricultural Economics and Rural Sociology, The Pennsylvania State University, University Park, PA 16802-5602

Conclusion
After carefully and comprehensively accounting for other local determinants of poverty, we
find that the presence of Wal-Mart unequivocally raised family poverty rates in US counties
during the 1990s relative to places that had no such stores. This was true not only as a consequence of existing stores in a county in 1987, but it was also an independent outcome of the
location of new stores between 1987 and 1998. The question whether the cost of relatively
higher poverty in a county is offset by the benefits of lower prices and wider choices available
to consumers associated with a Wal-Mart store cannot be answered here.
However, if Wal-Mart does contribute to a higher poverty rate, then it is not bearing the
full economic and social costs of its business practices. Instead, Wal-Mart transfers income
from the working poor and from taxpayers though welfare-programs directed at the poor to
stockholders and the heirs of the Wal-Mart fortune, as well as to consumers. These transfers
are in addition to the public infrastructure subsidies often provided by local communities. Regardless of the distributional effects, the Wal-Mart business model appears to extract cumulative rents that exceed those earned by owners of other corporations, including Microsoft.

An informative presentation
“Changing Fortunes: Poverty and Prosperity in Rural America”
Jensen, Leif, Stephan J. Goetz and Hema Swaminathan

http://nercrd.psu.edu/Regional_Poverty_Wksp/reg.povShowGoetz.pdf

kannan infratech

September 17th, 2012, 03:02 PM

Job Creation or Destruction?

Labor-Market Effects of Wal-Mart Expansion
Emek Basker, University of Missouri

http://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&ved=0CCAQFjAA&url=http%3A%2F%2Fciteseerx.ist.psu.edu%2Fviewdoc%2Fdownload%3Fdoi%3D10.1.1.202.8409%26rep%3Drep1%26type%3Dpdf&ei=7B1XUKnMNc_trQeCqoDgCA&usg=AFQjCNFuxneh_N81voGLR_wL2Iqc-2CO7A

Conclusion
Wal-Mart entry has raised concerns in many communities about the changes it may
cause to the size and structure of the retail industry. Wal-Mart’s reputed efficiency,
combined with its market power, could cause a decline in the number of retail jobs in
the community. In this paper, I do not take a position on whether such a decline is
favorable or harmful, but merely attempt to quantify the effect of Wal-Mart entry on
retail employment and on the number of retail establishments.

Using an instrumentalvariables approach to correct for endogeneity of Wal-Mart entry, and measurement error
in the data, I conclude that Wal-Mart entry has a small positive effect on retail employment
at the county level while reducing the number of small retail establishments in the
county. I also find a small negative effect of Wal-Mart entry on wholesale employment.
No effect can be seen on retail sectors in which Wal-Mart does not compete directly:
restaurants and automobile sales and service. The latter fact suggests that Wal-Mart
does not create large agglomeration externalities at the county level. Wal-Mart’s effect
on neighboring counties cannot be precisely estimated, so I cannot determine whether
Wal-Mart entry reduces retail employment in neighboring counties.

The experiment is a clean one, because I am able to identify the date of entry
precisely, using an instrumental-variables specification. The effect I estimate is a flexible
reduced-form effect, allowing both Wal-Mart and other firms in the county of entry to
adjust to the shock over a period of several years. Finally, because I use a large panel
of approximately 1750 counties over 23 years, and because Wal-Mart entry is a “large”
shock relative to the size of the local retail market inmost counties — median county retail
employment in 1990 was only 1500, while the averageWal-Mart store had approximately
300 employees — the effect can be estimated with relative precision. Of course, these
effects represent the average impact of Wal-Mart and may not be representative of any
individual county’s experience.

The small magnitude of the estimated effect of Wal-Mart on retail employment is
striking in light of the level of public discussion on this topic. Other effects Wal-Mart
entry — for example, on prices, tax revenue, or the environment — have not been ruled out
by this analysis; nor has the possibility that the small net county-level effects described
here mask much larger reallocations at the sub-county level. Publicly available data
cannot address that concern, so it remains an open question.

kannan infratech

September 17th, 2012, 03:20 PM

“Shopping for Subsidies": How Wal-Mart Uses Taxpayer Money to Finance Its Never-Ending Growth

Mattera, Philip and Anna Purinton,

http://www.goodjobsfirst.org/sites/default/files/docs/pdf/wmtstudy.pdf

If my guess is right, PC will help the Big MNC Retails in the same fashion as explained in this PDF.

I sincerely hope & wish that at least for once the lethargy of Indian Govt, state governments, policy makers and Oppicers will automatically kill the momentum and stop this move and help the country. :)

kannan infratech

September 17th, 2012, 03:25 PM

IMPACT OF THE WAL-MART PHENOMENON ON RURAL COMMUNITIES

Kenneth E. Stone, Professor of Economics, Iowa State University

http://www2.econ.iastate.edu/faculty/stone/10yrstudy.pdf

Conclusions and Recommendations

Rural communities have been losing retail sales to larger towns ever since Montgomery Ward and Sears Roebuck started their mail order businesses. However, the leakage of retail trade from small towns has accelerated in the last two decades with the
rapid proliferation of discount mass merchandiser stores in the larger towns and cities.
Studies in Iowa have shown that some towns below 5,000 population have lost nearly half their retail trade in the last 13 years. Public officials are placed in difficult situations as they decide whether to recruit and/or approve the establishment of new mass merchandiser stores. There is a need for an educational program aimed at public officials, to help them make better decisions regarding this problem

kannan infratech

September 17th, 2012, 03:29 PM

HAS WAL-MART BURIED MOM AND POP?: THE IMPACT OF WAL-MART ON SELFEMPLOYMENT AND SMALL ESTABLISHMENTS IN THE UNITED STATES

RUSSELL S. SOBEL, ANDREA M DEAN

http://www.cato.org/pubs/regulation/regv31n1/v31n1-1.pdf

kannan infratech

September 17th, 2012, 03:49 PM

Now coming to

What are the Alternative Models which may work for India .

One model is

Market-Oriented Agricultural Infrastructure: Appraisal of Public-Private Partnerships

http://www.odi.org.uk/resources/docs/2131.pdf

kannan infratech

September 17th, 2012, 03:53 PM

Indian Infrastructure Finance Report 2007 - IIT Kanpur

FINANCING OF RURAL INFRASTRUCTURE
Vijay Mahajan, Preeti Sahai, and Sandeep Pasrija

http://www.iitk.ac.in/3inetwork/html/reports/IIR2007/03-Financing.pdf

kannan infratech

September 17th, 2012, 03:57 PM

RIDF Disbursements cross 1 lakh crore

NABARD has achieved the milestone of disbursing more than 1,00,000 crore from Rural Infrastructure Development Fund. As at the end of September 2011, NABARD has disbursed 1,02,844 crore to 28 States and Union Territory of Puduchery. This include 18,500 crore disbursed to National Rural Roads Development Agency (NRRDA), New Delhi. Andhra Pradesh (9,711 cr.), Uttar Pradesh (7984 cr.), Gujarat (7,324 cr.), Tamil Nadu (6,523 cr.), Madhya Pradesh (5,464 cr.), Maharashtra (5,493 cr,), Rajasthan (5,406 cr.) West Bengal (4,694 cr.) Karnataka (4,406 cr.) topped the list of States which have availed maximum loan from RIDF. The loan is presently available to the State Govts. at 6.5% interest p.a.

The fund has touched the lives of rural population in more than one way by creating infrastructure in 31 approved activities during the last seventeen years.

For the current year (under RIDF XVII), an amount of 2,000 crore has been earmarked specifically for creation of warehousing infrastructure in different states. This, besides streamlining the management of foodgrains across all States, will take the growth trajectory of RIDF to a new high during this year.

NABARD Website - http://www.nabard.org/ridf/genesisofridf.asp

But the BIG question is how much of these funds really were spent on the creation of new Infra or upscaling / upgrading the existing infra.

The Govt may institute a separate panel of judges , engineers, finance experts, economic experts to monitor the spending & investments by corporate sectors - like SEBI doing for Stock Markets. At least no BIG scams will be possible.

geico2000

September 17th, 2012, 04:48 PM

A model that our government can take from China

Global FDI Trend by Retail Firms

As well as economic activities affected by globalisation, retail internationalisation is a current phenomenon that has accelerated since the mid 1970s (Dupuis and Prime, 1996). A general survey of Management Horizons indicates that the top 50 19 multinational retail firms aremostly from European countries exporting and
expanding retail formats in other countries, while US enterprises only started the expansion process in the 1990s (Dupuis and Prime, 1996). In the early 1990s, the single market in Europe provoked leading retail competitors to enter markets on different continents or in different countries to obtain a greater market share and
profits, such as Carrefour, Metro, and Tesco; as well as attracting US and Asian retailers like Hymall, Park n Shop, and Trust Mart from Hong Kong and Taiwan (Arnold, 2002). Thus, the free region of the US is also another determinant in the development of retail internationalisation, such as the establishment of Wal-Mart, The Limited, and other US retailers (Arnold, 2002).

However, in the current retail sector, retailers from Europe, the USA and Japan are now gradually entering into developing markets in Asia, South Korea, and Eastern Europe in order to expand retail business and maximise profits, which additionally makes their retail brand global and also enhances their competitive advantage (Arnold, 2002). Furthermore, Arnold (2002) asserts that different countries have won a different leading position, for example; Germany for hard discount and cash
and carry outlets; the UK for targeted and specialty stores; and France for hypermarkets that are well known in global markets today.
Consequently, due to significant consolidation by leading retailers, such as Wal-Mart, Carrefour, Tesco, Metro from western countries, there was a trend for expansion by existing retailers into new geographic regions in Asia or other developing countries in the world by using merger and acquisition strategies to explore more retail markets to increase their huge market presence in business fields in recent years

Policy in the Retail Sector

Before 1978, China was under a command economy, with both the wholesale and retail sectors controlled by the Ministry of Commerce and Ministry of Materials (Lo and Lee, 1994). During the period of reforming the economic sector, there has been a significant change in various sectors, thus, distribution is no longer a state
monopoly controlled by the government; instead they encourage private and collective firms, and have also given more autonomy to state enterprises in 1993, which made up about 90% of products being distributed via the market oriented channel (Yip, 1995). However, not until 1992 did the government permit opening the door to foreign investors in the retail market, and unlike the manufacturing sector, retailing represented a new and developing territory for MNEs in the 1990s
(Yip, 1995).

There are two main ways for a foreign company to enter China’s retail market, one is indirectly starting a manufacturing operation then directly sends output down the retail channel, or directly into retailing to source the inputs from upstream in the retail sector (Yip, 1995). In recent years, foreign firms are best advised to adopt a long-term market investment approach, rather than seeking quick profits over a short
term period. Furthermore, the government has been gradually relaxing its policies in retail sectors since 1979, with foreign firms only allowed to invest in the manufacturing sector and less than 30% of the finished products permitted to be sold in local markets (Dawson, 1993). Then in 1984, the government liberalised the import and export system to allow MNEs to trade directly with local import-export
firms in China. Consequently, in 1992, the government allowed foreign firms to invest in the retail sector through a joint-venture with a Chinese partner (Yip, 1995). By 1994, the government still forbids foreign firms from participating in wholesaling, which resulted in a linkage between manufacturing and retailing sectors, and even stated that a foreign joint-venture retail business was not allowed to engage in wholesaling or act as an import and export company for another firm (Arnold, 2002). Although the State Council’s quota for two large scale joint-venture
operations only existed in 11 locations, some local provincial governments approved foreign firm joint-ventures in retailing despite the restrictions laid out by the State Council in the 1990s. Also, many foreign retailers were still willing to enter China’s retail market early, in order to retain a cost competitive advantage in the long term,
with most retailers aware of the significance of developing local networks (Guan-xi) or investing in their own manufacturing operations.
Finally, in 2004, the government released the restrictions on the whole retail sector for foreign firms, without limitations on company size, the number of firms, product quotas, or investment locations (MOEA, 2004). Therefore, around 70% of the top 50 retailers in the world have entered the Chinese market, with some leading retailers
such as Wal-Mart (USA), Carrefour (France), and Metro (Germany) already
construct a complete retailing network in China; hence, the investment by MNEs in the retail sector in China will become more prosperous and competitive in the following years (MOEA, 2004)

kongutamizhan

September 17th, 2012, 05:16 PM

“Shopping for Subsidies": How Wal-Mart Uses Taxpayer Money to Finance Its Never-Ending Growth

Mattera, Philip and Anna Purinton, :)

sellathu sellathu. ivanga rendu perum anti-walmart activists.

geico2000

September 17th, 2012, 07:15 PM

The arguments offered by critics against the retail sector reforms focus on one or
more of the following points

:
 Independent stores will close, leading to massive job losses. Walmart
employs very few people in the United States. If allowed to expand in India as
much as Walmart has expanded in the United States, few thousand jobs may
be created but millions will be lost.

 Walmart will lower prices to dump goods, get competition out of the way,
become a monopoly, and then raise prices. We have seen this in the case of
the soft drinks industry. Pepsi and Coke came in and wiped out all the
domestic brands.

 India doesn't need foreign retailers, since home grown companies and
traditional markets may be able to do the job.

 Work will be done by Indians, profits will go to foreigners.

 Remember East India Company. It entered India as a trader and then took
over politically.

 There will be sterile homogeneity and Indian cities will look like cities
anywhere else.

 The government hasn't built consensus.

Supporters claim none of these objections has merit. They
claim:

[26]
 Organized retail will need workers. Walmart employs 1.4 million people in
United States alone.
[27] With United States population of about 300 million,
and India's population of about 1200 million, if Walmart-like retail companies
were to expand in India as much as their presence in the United States, and
the staffing level in Indian stores kept at the same level as in the United
States stores, Walmart alone would employ 5.6 million Indian citizens. In
addition, millions of additional jobs will be created during the building of and
the maintenance of retail stores, roads, cold storage centers, software
industry, electronic cash registers and other retail supporting organizations.
Instead of job losses, retail reforms are likely to be massive boost to Indian
job availability.

 India needs trillions of dollars to build its infrastructure, hospitals, housing and
schools for its growing population. Indian economy is small, with limited
surplus capital. Indian government is already operating on budget deficits. It is
simply not possible for Indian investors or Indian government to fund this
expansion, job creation and growth at the rate India needs. Global investment
capital through FDI is necessary. Beyond capital, Indian retail industry needs
knowledge and global integration. Global retail leaders, some of which are
partly owned by people of Indian origin,
[28]
can bring this knowledge. Global
integration can potentially open export markets for Indian farmers and
producers. Walmart, for example, expects to source and export some $1
billion worth of goods from India every year, since it came into Indian
wholesale retail market.
[29]

26. Tripathi, Salil (29 December 2011). "India needs Supermarkets". London: The Guardian.
27."Walmart Fact Sheets". Walmart. November 2011.
28."Indian retail kings around the world". Rediff. 6 December 2011.
29."Walmart Asia to make India an export hub". Business Standard. April 14, 2010. 23

 Walmart, Carrefour, Tesco, Target, Metro, Coop are some of over 350 global
retail companies with annual sales over $1 billion. These retail companies
have operated for over 30 years in numerous countries. They have not
become monopolies. Competition between Walmart-like retailers has kept
food prices in check. Canada credits their very low inflation rates to Walmarteffect.
[30]

Anti-trust laws and state regulations, such as those in Indian legal
code, have prevented food monopolies from forming anywhere in the world.
Price inflation in these countries has been 5 to 10 times lower than price
inflation in India. The current consumer price inflation in Europe and the
United States is less than 2%, compared to India's double digit inflation.

 Comparing 21st century to 18th century is inappropriate. Conditions today are
not same as in the 18th century. India wasn't a democracy then, it is today.
Global awareness and news media were not the same in 18th century as
today. Consider China today. It has over 57 million square feet of retail space
owned by foreigners, employing millions of Chinese citizens. Yet, China hasn't
become a vassal of imperialists. It enjoys respect from all global powers.
Other Asian countries like Malaysia, Taiwan, Thailand and Indonesia see
foreign retailers as catalysts of new technology and price reduction; and they
have benefitted immensely by welcoming FDI in retail. India too will benefit by
integrating with the world, rather than isolating itself.
[31]

 With 51% FDI limit in multi-brand retailers, nearly half of any profits will remain
in India. Any profits will be subject to taxes, and such taxes will reduce Indian
government budget deficit

 States have a right to say no to retail FDI within their jurisdiction.
[32]
States
have the right to add restrictions to the retail policy announced before they
implement them. Thus, they can place limits on number, market share, style,
diversity, homogeneity and other factors to suit their cultural preferences.
Finally, in future, states can always introduce regulations and India can
change the law to ensure the benefits of retail reforms reach the poorest and
weakest segments of Indian society, free and fair retail competition does
indeed lead to sharply lower inflation than current levels, small farmers get
better prices, jobs created by organized retail pay well, and healthier food
becomes available to more households.

 Inbuilt inefficiencies and wastage in distribution and storage account for why,
according to some estimates, as much as 40% of food production doesn't
reach consumers. Fifty million children in India are malnourished.

[33]
30. Grant, Tavia (January 25, 2011). "The Wal-Mart effect: food inflation tame in Canada". Toronto: The Globe and Mail.
31."Aam bania is more powerful than the aam aadmi". The Times of India. 4 December 2011.
32."FDI POLICY IN MULTI BRAND RETAIL". Ministry of Commerce, Government of India. 28 November 2011.
33. Tripathi, Salil (29 December 2011). "India needs Supermarkets". London: The Guardian.24

Food often rots at farms, in transit, or in antiquated state-run warehouses. Costconscious organized retail companies will avoid waste and loss, making food
available to the weakest and poorest segment of Indian society, while increasing
the income of small farmers. Walmart, for example, since its arrival in Indian
wholesale retail market, has successfully introduced "Direct Farm Project" at
Haider Nagar near Malerkotla in Punjab, where 110 farmers have been
connected with Bharti Walmart for sourcing fresh vegetables directly, thereby
reducing waste and bringing fresher produce to Indian consumers.
[34]

 Indian small shops employ workers without proper contracts, making them
work long hours. Many unorganized small shops depend on child labour. A
well-regulated retail sector will help curtail some of these abuses.
[35]

 The claim that there is no consensus is without merit. Retail reforms
discussions are not new. Comments from a wide cross-section of Indian
society including farmers' associations, industry bodies, consumer forums,
academics, traders' associations, investors, economists were analysed in
depth before the matter was discussed by the Committee of Secretaries. By
early August 2011, the consensus from various segments of Indian society
was overwhelming in favor of retail reforms.
[36]

The reform outline was presented in India's Rajya Sabha in August 2011. The
announced reforms are the result of this consensus process. The current opposition
is not helping the consensus process, since consensus is not built by threats and
disruption. Those who oppose current retail reforms should help build consensus
with ideas and proposals, if they have any. The opposition parties currently
disrupting the Indian parliament on retail reforms have not offered even one idea or a
single proposal on how India can eliminate food spoilage, reduce inflation, improve
food security, feed the poor, improve the incomes of small farmers.
Thus from the above contrasting views of critics and supporters; and also with
reference to Industry analysis using Porter‘s five force model, it can be inferred that
opening of the Indian retail sector will advance the welfare of nation as a whole.

kongutamizhan

September 17th, 2012, 07:33 PM

Porter‘s five force model,.

I wanted to make this point as well. People who are still in the mindset of east india compnay have to learn about this. Almost all retail operators operate in this model on a high-entry barrier. As evident from the fact that geico posted above Wal*Mart may be the largest company in the world, but still they are not monopoly (in-fact nowhere near it) even in a population that is 1/3rd of India.

And now, porter's model

http://s17.postimage.org/52s30yivj/porter.jpg

Potential Competitors

Markets that give high return will attract new firms to be set up to serve the market. But before the company starts to scurry to find out more about these potential competitors with intent to ‘squash’ them, a recommendation would be to first understand the markets that you are serving in, lookout for potential barriers of entry and exit in the market. Where possible, set up high barriers of entry and play up barriers of exit. Markets with high barriers have few players and have high profit margins. Why do we work on the barriers of entry and exit first instead of working to ‘squash’ the competitor? Because that gives the power to overcome the competitor without a battle. More than fighting battle and winning it, a supreme strategy is the one where you avoid and win it

Competitor

If a battle has to be fought, it has to be fought. Now look at the competitors. It doesn’t mean that one has to get hold of competitor data from their companies. Watchout for their ads, reach out to customers by means of surveys. Common suppliers can be a good source of information too.

Substitutes

Substitutes are defined as products that would increase the propensity of customers to switch to alternatives. In order to gather better intelligence on the available substitutes and its standing in customers, companies should directly conduct surveys with the customers themselves. With customers being more astute consumers, always seeking out the best deal and with the Internet rapidly reducing the barriers that arise from information asymmetric, customers are the best data source to seek out the available substitutes. What companies need from customers would be the name of the substitutes and what customers are thinking about these substitutes. With such information, companies can go online to seek out more information on these substitutes, understand what their value proposition to the customers is and how customers are reacting to it. Companies can also purchase reports from industry researchers such as Gartner and IDC to understand more about the standing of existing substitutes or competitors.

Customers

It has found its ways especially into marketing where there is a strong desire to reach the right people at the right place and at the right time. As such marketing analytics has entrenched itself firmly in helping companies to understand more about their customers, areas of opportunities, building brand loyalty and preventing attrition

Suppliers

In many battles that are fought out in ancient China, there are some battles that are fought out by cutting the supply chain or eradicate the logistics of enemy’s army. For a business to be able to meet its demand well, the management of suppliers is of utmost importance. As such, in recent years we have seen companies like Tesco and Wal-mart working together with their suppliers to ensure that they can meet demand when it happens in their retail stores. Companies can use analytics and work with their suppliers to ensure constant supply of goods and services. Another thing to take note of is the need to have a Business Continuity Plan that is worked together with suppliers. Such importance is seen in the Japan Earthquake of March 2011.

geico2000

September 17th, 2012, 08:01 PM

Analysis of Retail Sector:

1. Strengths:

 Major contribution to GDP: the retail sector in India is hovering

around 33-35% of GDP as compared to around 20% in USA.

 High Growth Rate: the retail sector in India enjoys an extremely high

growth rate of approximately 46%.

 High Potential: since the organised portion of retail sector is only 2-3%,

thereby creating lot of potential for future players.

 High Employment Generator: the retail sector employs 7% of work

force in India, which is rite now limited to unorganised sector only.Once the

reforms get implemented this percentage is likely to increase substantially.

2. Weaknesses (limitation):

 Lack of Competitors: AT Kearney‘s study on global retailing trends

found that India is least competitive as well as least saturated markets of the

world.

 Highly Unorganised: The unorganised portion of retail sector is only

97% as compared to US, which is only 20%.

 Low Productivity: Mckinsey study claims retail productivity in India is

very low as compared to its international peers.

 Shortage of Talented Professionals: the retail trade business in

India is not considered as reputed profession and is mostly carried out by the

family members (self-employment and captive business). Such people are not

academically and professionally qualified.

 No ‗Industry‘ status, hence creating financial issues for

retailers: the retail sector in India does not enjoy industry status in India,

thereby making difficult for retailers to raise funds.

25

3. Opportunities (benefits):

 There will be more organization in the sector: Organized retail

will need more workers. According to findings of KPMG , in China, the

employment in both retail and wholesale trade increased from 4% in 1992 to

about 7% in 2001, post reforms and innovative competition in retail sector in

that country.

 Healthy Competition will be boosted and there will be a

check on the prices (inflation):Retail giants such as Walmart,

Carrefour, Tesco, Target and other global retail companies already have

operations in other countries for over 30 years. Until now, they have not at all

become monopolies rather they have managed to keep a check on the food

inflation through their healthy competitive practices.

 Create transparency in the system: the intermediaries operating

as per mandi norms do not have transparency in their pricing. According to

some of the reports, an average Indian farmer realises only one-third of the

price, which the final consumer pays.

 Intermediaries and mandi system will be evicted, hence

directly benefiting the farmers and producers: the prices of

commodities will automatically be checked. For example, according to

Business Standard, Walmart has introduced ―Direct Farm Project‖ at Haider

Nagar in Punjab, where 110 farmers have been connected with Bharti

Walmart for sourcing fresh vegetables directly.

 Quality Control and Control over Leakage and Wastage:

due to organisation of the sector, 40% of the production does not reach the

ultimate consumer. According to the news in Times of India, 42% of the

children below the age group of 5 are malnourished and Prime Minister

Dr.Manmohan Singh has termed it as ―national shame‖. Food often gets rot in

farm, in transit and in state-run warehouses. Cost conscious and highly

competitive retailers will try to avoid these wastages and losses and it will be

their endeavour to make quality products available at lowest prices, hence

making food available to weakest and poorest segment of Indian society.

 Heavy flow of capital will help in building up the

infrastructure for the growing population: India is already

operating in budgetary deficit. Neither the government of India nor domestic

investors are capable of satisfying the growing needs (school, hospitals,

transport etc.) of the ever growing Indian population. Hence foreign capital

inflow will enable us to create a heavy capital base.

 There will be sustainable development and many other

economic issues will be focussed upon:many Indian small shop

26

owners employ workers, who are not under any contract and also under aged

workers giving rise to child-labour. It also boosts corruption and black money.

4. Threats:

 Current Independent Stores will be compelled to close:

This will lead to massive job loss as most of the operations in big stores like

Walmart are highly automated requiring less work force.

 Big players can knock-out competition: they can afford to lower

prices in initial stages, become monopoly and then raise prise later.

 India does not need foreign retailers: as they can satisfy the

whole domestic demand.

 Remember East India Company it entered India as trader

and then took over politically.

 The government hasn‘t able to build consensus.

In view of the above analysis, if we try to balance opportunities and prospects

attached to the given economic reforms, it will definitely cause good to Indian

economy and consequently to public at large, if once implemented. Thus the period

for which we delay these reforms will be loss for government only, since majority of

the public is in favour of reforms. All the above mentioned drawbacks are mostly

politically created. With the implementation of this policy all stakeholders will benefit

whether it is consumer through quality products at low price, farmers through more

transparency in trading or Indian corporates with 49% profit share remaining with

Indian companies only.

geico2000

September 17th, 2012, 08:04 PM

Effects of FDI on various Stakeholders

5.1 Impact on Farming Communities

A supermarket revolution‖ has been underway in developing countries since the

early 1990s. Supermarkets (here referring to all modern retail, which includes

chain stores of various formats such as supermarkets, hypermarkets, and

convenience and neighbourhood stores) have now gone well beyond the initial

upper- and middle-class clientele in many countries to reach the mass market.

Within the food system, the effects of this trend touch not only traditional retailers,

but also the wholesale, processing, and farm sectors.

When supermarkets modernize their procurement systems, they require more

from suppliers with respect to volume, consistency, quality, costs, and commercial

practices.

Supermarkets‘ impact on suppliers is biggest and earliest for food processing and

food-manufacturing enterprises, given that some 80% of what supermarkets sell

consists of processed, staple, or semi-processed products. But by affecting

processors, supermarkets indirectly affect farmers, because processors tend to

pass on the demands placed on them by their retail clients. Supermarket chains

prefer, if they are able, to source from medium and large processing enterprises,

which are usually better positioned than small enterprises to meet supermarkets‘

requirements. The rise of supermarkets thus poses an early challenge to

processed food microenterprises in urban areas.

By contrast, as supermarkets modernize the procurement of fresh produce (some

10–15% of supermarkets‘ food sales in developing countries), they increasingly

source from farmers through ―specialized and dedicated wholesalers‖ (specialized

in product lines and dedicated to modern segments) and occasionally through

their own collection centers.

Where supermarkets source from small farmers, they tend to buy from farmers

who have the most non-land assets (like equipment and irrigation), the greatest

access to infrastructure (like roads and cold chain facilities), and the upper size

treacle of land (among small farmers). Where supermarkets cannot source from

medium- or large-scale farmers, and small farmers lack the needed assets,

supermarket chains (or their agents such as the specialized and dedicated

wholesalers) sometimes help farmers with training, credit, equipment, and other

needs. Such assistance is not likely to become generalized, however, and so

overtime asset-poor small farmers will face increasing challenges surviving in the

market as it modernizes.

When farmers enter supermarket channels, they tend to earn from 20 to 50%

more in net terms. Among tomato farmers in Indonesia, for example, net profit

(including the value of own labour as imputed cost) is 33–39% higher among

supermarket channel participants than among participants in traditional markets.

Farm labour also gains. But supplying supermarket chains requires farmers to

28

make more up-front investments and meet greater demands for quality,

consistency, and volume compared with marketing to traditional markets.

Support for retail reforms

In a pan-Indian survey conducted over the weekend of 3 December 2011,

overwhelming majority of consumers and farmers in and around ten major cities

across the country support the retail reforms. Over 90 per cent of consumers said

FDI in retail will bring down prices and offer a wider choice of goods. Nearly 78

per cent of farmers said they will get better prices for their produce from multi-

format stores. Over 75 per cent of the traders claimed their marketing resources

will continue to be needed to push sales through multiple channels, but they may

have to accept lower margins for greater volumes.[37]

.

Farmer groups

Various farmer associations in India have announced their support for the retail

reforms. For example:

 Shriram Gadhve of All India Vegetable Growers Association (AIVGA) claims

his organization supports retail reform. He claimed that currently, it is the

middlemen commission agents who benefit at the cost of farmers. He urged

that the retail reform must focus on rural areas and that farmers receive

benefits. Gadhve claimed, "A better cold storage would help since this could

help prevent the existing loss of 34% of fruits and vegetables due to inefficient

systems in place." AIVGA operates in nine states including Maharashtra,

Andhra Pradesh, West Bengal, Bihar, Chattisgarh, Punjab and Haryana with

2,200 farmer outfits as its members.[38]

 Bharat Krishak Samaj, a farmer association with more than 75,000 members

says it supports retail reform. Ajay Vir Jakhar, the chairman of Bharat Krishak

Samaj, claimed a monopoly exists between the private guilds of middlemen,

commission agents at the sabzi mandis (India's wholesale markets for

vegetables and farm produce) and the small shopkeepers in the unorganized

retail market. Given the perishable nature of food like fruit and vegetables,

without the option of safe and reliable cold storage, the farmer is compelled to

sell his crop at whatever price he can get. He cannot wait for a better price

and is thus exploited by the current monopoly of middlemen. Jakhar asked

that the government make it mandatory for organized retailers to buy 75% of

their produce directly from farmers, bypassing the middlemen monopoly and

India's sabzi mandi auction system.[38]

37."India government puts foreign supermarkets "on pause"". Reuters. 4 December 2011

38."Farmer Organisations back retail FDI". The Financial Express. 2 December 2011.

29

 Consortium of Indian Farmers Associations (CIFA) announced its support for

retail reform. Chengal Reddy, secretary general of CIFA claimed retail reform

could do lots for Indian farmers. Reddy commented, ―India has 600 million

farmers, 1,200 million consumers and 5 million traders. I fail to understand

why political parties are taking an anti-farmer stand and worried about half a

million brokers and small shopkeepers.‖ CIFA mainly operates in Andhra

Pradesh, Karnataka and Tamil Nadu; but has a growing member from rest of

India, including Shetkari Sanghatana in Maharashtra, Rajasthan Kisan Union

and Himachal Farmer Organisations.

 Prakash Thakur, the chairman of the People for Environment Horticulture &

Livelihood of Himachal Pradesh, announcing his support for retail reforms

claimed FDI is expected to roll out produce storage centers that will increase

market access, reduce the number of middlemen and enhance returns to

farmers.[39] Highly perishable fruits like cherry, apricot, peaches and plums have a huge demand but are unable to tap the market fully because of lack of

cold storage and transport infrastructure. Sales will boost with the opening up

of retail. Even though India is the second-largest producer of fruits and

vegetables in the world, its storage infrastructure is grossly inadequate,

claimed Thakur.

 Sharad Joshi, founder of Shetkari Sangathana (farmers‘ association), has

announced his support for retail reforms.[40] Joshi claims FDI will help the farm sector improve critical infrastructure and integrate farmer-consumer

relationship. Today, the existing retail has not been able to supply fresh

vegetables to the consumers because they have not invested in the backward

integration. When the farmers' produce reaches the end consumer directly,

the farmers will naturally be benefited. Joshi feels retail reform is just a first

step of needed agricultural reforms in India, and that the government should

pursue additional reforms.

Suryamurthy, in an article in The Telegraph, claims farmer groups across India do not support status quo and seek retail reforms, because with the

current retail system the farmer is being exploited. For example, the article

claims: [41]

 Indian farmers get only one third of the price consumers pay for food staples,

the rest is taken as commissions and mark-ups by middlemen and

shopkeepers.

 For perishable horticulture produce, average price farmers receive is barely

12 to 15% of the final price consumer pays.

 Indian potato farmers sell their crop for Rs.2 to 3 a kilogram, while the Indian

consumer buys the same potato for Rs.12 to 20 a kilogram.[42]

geico2000

September 17th, 2012, 08:10 PM

Farmers [43]

CASE 1. PepsiCo India HELPING FARMERS IMPROVE

YIELD AND INCOME

The company‘s vision is to create a cost-effective, localized agro-supply chain for its

business by:

 Building PepsiCo‘s stature as a development partner by helping farmers grow

more and earn more.

 Introducing new high-yielding varieties of potato and other edibles.

 Introducing sustainable farming methods and practising contact farming.

 Making world-class agricultural practices available to farmers and helping

them raise farm productivity.

 Working closely with farmers and state governments to improve agro-

sustainability and crop diversification.

 Providing customized solutions to suit specific geographies and locations.

 Facilitating financial and insurance services in order to de-risk farming.

THE JOURNEY SO FAR

Where stand today, at a glimpse

 Today PepsiCo India‘s potato farming programme reaches out to more than

12,000 farmer families across six states. We provide farmers with superior

seeds, timely agricultural inputs and supply of agricultural implements free of

charge.

 We have an assured buy-back mechanism at a prefixed rate with farmers.

This insulates them from market price fluctuations.

 Through our tie-up with State Bank of India, we help farmers get credit at a

lower rate of interest.

 We have arranged weather insurance for farmers through our tie-up with ICICI

Lombard.

 We have a retention ratio of over 90%, which reveals the depth and success

of our partnership.

 In 2010, our contract farmers in West Bengal registered a phenomenal 100%

growth in crop output, creating in a huge increase in farm income.

 The remarkable growth has resulted in farmers receiving a profit between

Rs.20, 000– 40,000 per acre, as compared to Rs.10000–20,000 per acre in

2009.

43.http://pepsicoindia.co.in/purpose/environmental-sustainability/partnership-with-farmers.html

31

Case 2. Bharti Walmart initiative through Direct Farm

Project

Corporate Social Responsibility (CSR) initiatives in Bharti Walmart are aimed at

empowerment of the community thereby fostering inclusive growth. Through our

philanthropic programs and partnerships, we support initiatives focused on

enhancing opportunities in the areas of education, skills training and generating local

employment, women empowerment and community development.

In conjunction with the farmers‘ development program in Punjab, community-building

activities have been implemented in village, Haider Nagar. Due to lack of sanitation

facilities, households tend to use the farm fields, thereby affecting yields and

impacting the produce that is being supplied to stores. In order to improve the yields

and the community‘s way of life, we are working on the issues of Sanitation and

Biogas, Education, Awareness Building and Health and Hygiene.

 Education: 100% children enrolled in formal education program.

Children‘s group had been formed to discuss children issues. All the non-

school going children had been given non-formal basic education required to

mainstream them in the government schools. A sanitation block has been

constructed, hand pump has been installed and school uniforms have been

donated to create a better learning environment for children. Fifteen students

have been mainstreamed back in school.

 Health and Hygiene: A dispensary has been started in Haider Nagar

to help people avail medical facilities in the village itself. Nearly 2000 patients

have availed the dispensary facilities. Twenty Community Dustbins have also

been installed in the village to bring about a change in the living conditions of

the people and to provide them garbage free environment.

 Sanitation and Biogas: Ensured that 100% households have toilets

in the village. Eighty Bio Gas plants have been installed to help people

conserve gas energy and utilize the waste generated from their cattle and

toilets; thus making the environment healthier.

 Waste Management: twenty Community Dustbins have been installed

in the village to bring about a change in the living conditions of the people and

to provide them garbage free environment thus ensuring a healthier living.

This and many other cases suggest that opening of Indian retail sector to FDI is a

win-win situation for farmers. Farmers would benefit significantly from the option

of direct sales to organized retailers. For instance, the profit realization for

farmers selling directly to the organized retailers is expected to be much higher

than that received from selling in the mandis. Also Rise in the organized retail

whether domestic or through entry of foreign players will lead to an increase in

investments in both forward and backward infrastructure such as cold chain and

storage infrastructure, warehousing and distribution channels thereby leading to

improvement in the supply chain infrastructure in the long run. Global majors

such as Wal-mart, Carrefour and Tesco are expected to bring a global scale in

their negotiations with the

Source:http://bharti-walmart.in/Community.aspx?id=64

32

MNCs such as Unilever, Nestlé, P&G, Pepsi, Coke, etc. The improved cold chain

and storage infrastructure will no doubt lead to a reduction in losses of agriculture

produce. It may also lead to removal of intermediaries in the retail value chain

and curtail other inefficiencies. And this may, result in higher income for a farmer.

5.2 Impact on Traditional Mom and Pop Stores

The main question being raised is whether the traditional mom and pop stores will

survive and co-exist or leave the field for major organized retail players?

The answer could be a co-existence. The major advantage for the smaller players

is the size, complexity and diversity of our Indian Markets. If we look at the

organized retail players, most of them have opened shop in the Metros, Tier 1 and

Tier 2 towns. Very rarely do we find organized players in the rural areas and we

have more than 70% of the population living in the rural areas.

There are a multitude of reasons being floated around to prevent the liberalisation

of the FDI norms for Indian retail:

 Primary among these is the concern regarding the kirana stores as well other

locally operated Mom and Pop stores being adversely affected by the entry of

global retail giants such as Walmart, Carrefour and Tesco. As these brands

would come with advanced capabilities of scale and infrastructure in addition

to having deep pockets, it is argued that this would result in the loss of jobs for

lakhs of people absorbed in the unorganised sector.

 Fears have also been raised over the lowering of prices of products owing to

better operational efficiencies of the organised players that would affect the

profit margins of the unorganised players.

 Instability surrounding the political arena with a number of scams of varying

magnitudes doing the rounds has also led to a sense of uncertainty among

foreign investors.

Many Industry experts though, feel that the reservations against the introduction of

Multi-Brand retail are mostly misplaced. The successful deployment of 100%FDI in

China is a case in point. Partial FDI in retail was introduced in 1992 in China.

Subsequently, in December 2004, the Chinese retail market was fully opened up to

utilise the enormous manpower and wide customer base available that has led to a

rapid growth of the sector. Today, its retail sector is the second largest (in value) in

the world with global retailers such as Walmart, 7-Eleven and Carrefour comprising

10% of the total merchandise.

Multi-brand retail, if allowed, is expected to transform the retail landscape in a

significant way:

 Firstly, the organised players would bring in the much needed investment that

would spur the further growth of the sector. This would be particularly

important for sustenance of some of the domestic retailers that don‘t have the

resources to ride out the storm during an economic slump such as the case

with Vishal, Subhiksha and Koutons, which couldn‘t arrange for funds to

sustain their growth.

 The technical know-how, global best practices, quality standards and cost

competitiveness brought forth through FDI would augur well for the domestic

players to garner the necessary support to sustain their growth.

33

 Indian has also been crippled by rising inflation rates that have refused to

come within accepted levels. A key reason for this has been attributed to the

vastly avoidable supply chain costs in the Indian food and grocery sales which has been estimated to be a whopping US$ 24 Bn. The infrastructure support

extended to improve the backend processes of the supply chain would enable

to eliminate such wastages and enhance the operational efficiency.

 FDI in multi-brand retail would in no way endanger the jobs of people

employed in the unorganised retail sector. On the contrary, it would lead to

the creation of millions of jobs as massive infrastructure capabilities would be

needed to cater to the changing lifestyle needs of the urban Indian who is

keen on allocating the disposable income towards organised retailing in

addition to the local kirana stores. These stores would be able to retain their

importance owing to their unique characteristics of convenience, proximity

and skills in retaining customers. Also, these would be more prominent in the

Tier-II and Tier-III cities where the organised supermarkets would find it

harder to establish themselves.

FDI in multi-brand retail is therefore a necessary step that needs to be taken to

propel further growth in the sector. This would not only prove to be fruitful for the

economy as a whole but will also integrate the Indian retail sector with the global

retail market. It is not a question of ‗how‘ it will be done but ‗when‘.

Contrary to the above view,

Traditional retailing has been established in India for many centuries, and is

characterized by small, family-owned operations.

Because of this, such businesses are usually very low-margin, are owner-

operated, and have mostly negligible real estate and labour costs. Moreover, they

also pay little by way of taxes. Consumer familiarity that runs from generation to

generation is one big advantage for the traditional retailing sector. It is often said

that the mom-and-pop store in India is more like a father-and-son enterprise.

Such small shops develop strong networks with local neighbourhoods. The

informal system of credit adds to their attractiveness, with many houses ‗running

up a tab‘ with their neighbourhood kirana store, paying it off every fortnight or

month. Moreover, low labour costs also allow shops to employ delivery boys, such

that consumers may order their grocery list directly on the phone. These

advantages are significant, though hard to quantify. In contrast, players in the

organized sector have to cover big fixed costs, and yet have to keep prices low

enough to be able to compete with the traditional sector. Getting customers to

switch their purchasing away from small neighbourhood shops and towards large-

scale retailers may be a major challenge. The experience of large Indian retailers

such as Big Bazaar shows that it is indeed possible. Anecdotal evidence of

consumers who return from such shops suggests that the wholesale model

provides for major bargains – something Indian consumers are always on the

lookout for.

The other major challenge for retailers in India, as opposed to the US, is the

storage setup of households. For the large-scale retail model to work, consumers

visit such large stores and return with supplies likely to last them for a few weeks.

Having such easy access to neighbourhood stores with whom, as discussed

above, it is possible to have a line of credit and easy delivery service, congested

34

urban living conditions imply that few Indian households might be equipped with

adequate storage facilities.

In urban settings, real estate rents are also very high. Thus opportunities in this

sector are limited to those retailers with deep pockets, and puts pressure on their

margins. Conversely for retailers looking to set up large stores at a distance from

residential neighbourhoods may struggle to attract consumers away from their

traditional sources of groceries and other products.

geico2000

September 17th, 2012, 08:17 PM

Impact of organized retail on unorganized

Retail (Case Study – China)

Myth: Organized global retailers eat up local retail chains including mom and pop

stores

Truth: China, which brought in global retailers like Wal-Mart in 1996, has just

about 20% of organized retail meaning the argument that unorganized retail gets

decimated, is fallacious.

1. FDI in retailing was permitted in China for the first time in 1992. Foreign retailers

were initially permitted to trade only in six Provinces and Special Economic Zones.

Foreign ownership was initially restricted to 49%.

2. Foreign ownership restrictions have progressively been lifted and, and following

China‘s accession to WTO, effective December, 2004, there are no equity

restrictions.

3. Employment in the retail and wholesale trade increased from about 4% of

the total labour force in 1992 to about 7% in 2001. The numbers of traditional

retailers were also increased by around 30% between 1996 and 2001.

4. In 2006, the total retail sale in China amounted to USD 785 billion, of which the

share of organized retail amounted to 20%.

5. Some of the changes which have occurred in China, following the liberalization of

its retail sector, include:

· Over 600 hypermarkets were opened between 1996 and 2001

· The number of small outlets (equivalent to „kiranas") increased from 1.9

million to over 2.5 million.

· Employment in the retail and wholesale sectors increased from 28 million people to

54 million people from 1992 to 2000

Source: DIPP

35

Effect of FDI on Traditional Market in China

Type No. of stores in 1996 No. of stores in 2001

Type No. of stores in1996 No. of stores in 2001

Traditional 1,920,604 2,565,028

Supermarkets 13,079 152,194

Convenience 18,091

Hypermarkets 593

Source: Foreign Direct Investment in Retail – ICICI Bank (2004)

Thus the above discussion and case of China suggest that it is too early to predict

the erosion of mom and pop stores in India with opening of multi-brand retail sector

in India to foreign investors.

5.3 Impact on Consumers and existing Supermarkets

Supermarkets tend to charge consumers lower prices and offer more diverse

products and higher quality than traditional retailers—these competitive

advantages allow them to spread quickly, winning consumer market share. In

most countries supermarkets offer lower prices first in the processed and semi-

processed food segments.

Only recently, mainly in the first- and second-wave countries have supermarket

prices for fresh fruits and vegetables been lower than traditional retailers‘ (except

in India). The food price savings accrue first to the middle class, but as

supermarkets spread into the food markets of the urban poor and into rural towns,

they have positive food security impacts on poor consumers. For example, in

Delhi, India, the basic foods of the urban poor are cheaper in supermarkets than

in traditional retail shops: rice and wheat are 15% cheaper and vegetables are

33% cheaper.

Existing Indian retail firms such as Spencer's, Foodworld

Supermarkets Ltd, Nilgiri's and ShopRite support retail reform and consider

international competition as a blessing in disguise. They expect a flurry of joint

ventures with global majors for expansion capital and opportunity to gain expertise

in supply chain management. Spencer's Retail with 200 stores in India, and with

retail of fresh vegetables and fruits accounting for 55% of its business claims retail

reform to be a win-win situation, as they already procure the farm products directly

from the growers without the involvement of middlemen or traders. Spencer‘s

claims that there is scope for it to expand its footprint in terms of store location as

well as procuring farm products. Foodworld, which operates over 60 stores, plans

to ramp up its presence to more than 200 locations. It has already tied up with

Hong Kong-based Dairy Farm International. With the relaxation in international

investments in Indian retail, India‘s Foodworld expects its global relationship will

only get stronger.

http://cci.gov.in/images/media/ResearchReports/FDI%20in%20Indian%20Retail%20Sector%20Analysis%20of%20Competition%20in%20Agri-Food%20Sector.pdf

arun82

September 18th, 2012, 07:25 AM

My analysis of FDI retail

India is a peculiar country with a different breed of customers. Assuming that these giants set up shop in 500 cities in India. Still there is huge area which cannot be covered by these giants. They will not find it viable in a business perspective to setup shop in each and every corner of the country.

For eg If they set up a huge supermarket in a locality . Not all the people will buy in the supermarket. Becos we have a huge population whose grocery list will be 1 Kg rice, Rs 2 washing soap, Rs 2 oil packet and Rs 2 bathing soap. Will the giants be able to tap this market.

There will be no change in the farmers life whether there is FDI or No FDI. Becos both will source from the wholesalers. The possibility of farmers directly selling to the corporates will have little reach.

Most of the small shops run on credit basis. The consumers will buy the Goods and pay them when they have money. This happens on the basis of the personal rapport of the shop owner and the consumer . This is not possible with the gaints.

In my opinion these giants will be pitched against the likes of More, Spencers, Food bazaar. They will target the upper middle class.

They cannot reach the bottom pyramid in the format they use in western countries.

arun82

September 18th, 2012, 07:28 AM

We can have the example of Saravana Stores which sells furnitures dead cheap. But we have a large furniture market in Kodambakkam. These shops should have been closed long back if people buy where it is cheap.

kg4129

September 18th, 2012, 08:56 AM

FDI will be allowed only in 53 Cities which crosses 1Million population as per 2011 census....

In TN Only Chennai, Coimbatore, Madurai & Trichy allowed to set up any such kind of stores...

I don't think, Not more than two stores (Max) in small city like Trichy for the next 5 to 10 years, in case TN governemnet allowed...

Will it be really hurting the local annachi & formers in whole central districts?

Not at all

kannan infratech

September 18th, 2012, 10:29 AM

kannan infratech

September 18th, 2012, 10:52 AM

As we have seen from all these discussions,

Farmers will continue to get what they were getting in shorter term and it all depends on how the FDI giants treat them later in long term.

Instead of small farmers, coolies, cart owners, local small businessmen / middlemen, small shops, shandy vendors, street vendors and kirana stores, bulk of the profit will be taken by the FDI giants. The end clients also will not benefit at all.

The rural economy is now doctored to sub serve the urban economy at Urban people's terms.

Long Live India.

kannan infratech

September 18th, 2012, 12:30 PM

Many Indian Retail giants like TVS (Stop & Shop), Subiksha, RPG, Reliance, Heritage and of late Pantaloon group etc failed or failing miserably since they tried to follow the same model as Wall Mart.

Their focus has been only the Getting Rich Middle Class and they all gave a damn for poor or Farmer class. Real Estate also followed the same policy and is stuck in almost all cities.

We dont need Wall Mart to teach us what is Retail and we have been doing much more successfully in Micro and middle levels for many centuries.

We should rather develop an India Centric new model based on amul or Nirma and should try to retain all the gains / profits within India. e choupal by ITC seems a modern model but with Indian roots.

Why Namkkal farmers chased away the Reliance purchase executives from the recent meetings ? Threatening the poor uneducated farmers with lawsuits. All legal protection to farmers mentioned in some posts are all BS. All will be in favour of the Retail giants and not in fav of farmers.

Lack of Competition in India...... Bloody, it is the worst competition ever... Just visit any fish market or shandy or Koyambedu market in early mornings if you do not know what is competition. What the Biggies say is that they want competition between Wall Mart & TESCO.

Low Productivity - very much true. But Contract Farming has been a failure in India due to similar reasons. The CG & SGs have to step in rather than the MNCs. MNCS will source from other countries all of a sudden based on the world prices and the local farmer will not be even aware.

CG & SGs can allocate enough funds specifically for Agri Business infra and involve Pvt sector by PPP model. The market economy will guide the future course of action and the quality can only improve northwards.

Transparency from MNCs & Corporates...- Nothing to say.... See what Amul has done and that is transparency.

Quality Control - in paper yes.. very important....But why my grandpa was more healthier than my father and my father than me and me than my son. Where was the quality control ?

The latest news is that all veg suppliers & meat suppliers to city have to get the quality checked and certified. By whom ? Govt Babus. More expenses ??? WIll the QC be alright ?

How come there were cockroaches inside packed Pepsi Bottles ? Why the Mercury content is so high in Pepsi & Coke ? Are they processing the ground water properly?

Please read my post on Pepsi experiment in Punjab and what India gained by that.

Industry status - What will the farmer gain ? but the Corporates will gain massively by cheap loans.

Govt should supply quality power and charge full for the same. Then the cost of the same will be part of the cost from the farmer.

If political parties stay away from this, the local farmers are capable enough to manage the market through Co operatives or local shandys. What they want is the storage space, refrigeration, logistics. We do not need Retail majors for this.

FCI and similar are spoiling the market and PDS is a sham (even though for the lowest strata it is helpful) . TN fares better here compared to other states.

Now the MNCs will invest into local corporates and gobble them up later (aka Coke). India stands to lose anyhow.

Though I know for sure that I am shouting for a failed cause, I just want the truth to be known to many youngsters who are made to believe that this reform is the mother of all reforms and India is going to gain a lot.

We will debate on this after a few years with huge fresh scams.

Arul Murugan

September 18th, 2012, 01:16 PM

We dont need Wall Mart to teach us what is Retail and we have been doing much more successfully in Micro and middle levels for many centuries.

:cheers:

kannan infratech

September 18th, 2012, 02:10 PM

Mama... Notes Eduthukko... Appadiye konjam snacks eduthukko... Ippo Tune Chenge -u

Next hot topic is Gold ETF.

All leading Indian newspapers & magazines are filled with Gold ETF scheme & Double ETF scheme and huge benefits.

Our Honourable FM has been advising Indian citizens not to buy physical gold and instead invest in ETF.

What is Gold ETF ?

Gold Exchange Traded Funds
http://www.equitybulls.com/mutualfunds/goldetf.pdf

Gold Exchange Traded Fund
Exchange Traded Funds (ETFs) are open ended mutual funds that are passively managed and most of them seek to mirror the return of an index, a commodity or a basket of assets. ETFs are listed and traded on stock exchanges like stocks. They enable investors to gain broad exposure to indices or defined underlying asset (commodity) with relative case, on a real-time basis, and at a lower cost than many other forms of investing.
Gold ETFs provided investors a means of participating in the gold bullion market without the necessity of taking physical delivery of gold, and to buy and sell that participation through the trading of a security on stock exchange. Gold ETF would be a passive investment; so, when gold prices move up, the ETF appreciates and when gold prices move down, the ETF loses value.

Gold ETF tracks the performance of Gold Bullion. Gold ETFs provide returns that, before
expenses, closely correspond to the returns provided by physical Gold. Each unit is
approximately equal to the price of 1 gram of Gold. But, there are Gold ETFs which also provide a unit which is approximately equal to the price of ½ gram of Gold.

What is Double ETF ?

Definition of 'Double Gold ETF'
An exchange traded fund that tracks the value of gold and responds to movements in the same manner as an otherwise similar double leveraged ETF. A double gold ETF is one in which the spot value of gold or a basket of gold companies acts as the underlying for the fund. The ETF attempts to deliver price movements equal to double the movements of the underlying gold value.

Investopedia explains 'Double Gold ETF'
It is important to note that even though there is a potential for huge profits with this strategy, the risk that can be incurred could also be significant, in that the price could fall and losses could be huge. Double gold ETFs are by no means a unique fund product. There are numerous leveraged ETFs that aim to deliver movements equal to two or more times the movements of their underlyings. Some examples include leveraged ETFs on natural gas and crude oil. These ETFs can also aim to mimic an inverse movement relative to the underlying; such ETFs are known as inverse or bear ETFs.

http://articles.economictimes.indiatimes.com/2012-09-12/news/33789349_1_gold-etfs-gold-prices-inflows

Gold ETFs see inflows for second consecutive month
Madhu T, ET Bureau Sep 12, 2012, 06.39PM IST

Monthly statistics released by Association of Mutual Funds in India (AMFI), reveals that gold ETFs have seen inflows of Rs 88 crore for the month of August 2012 after a net inflow of Rs 95 crore for the month of July 2012. That makes gold ETFs see inflows for two consecutive months, after witnessing outflows in May and June 2012. A point to note is gold ETFs as a category has seen outflows of Rs 35 crore till date in FY2012-2013.

"Renewed interest in gold is an outcome of investors' response to expansionary monetary policies in the developed countries," says a Mumbai based wealth manager. Gold has surpassed Rs 32000 levels per 10 gram. "Investors were selling gold as it neared psychological level of Rs 30,000. But as gold makes a swift movement upwards crossing the level of Rs 30,000, investors are coming back to ride the rally in gold," says Abhishek Gupta, ceo, Moat Wealth Advisors.

http://www.indian-share-tips.com/2011/10/nse-also-joins-gold-etf-campaigning.html

NSE also Joins Gold ETF Campaigning Blitzkrieg

This time gold ETF are going to hog the lime light as we see an ovedose of campaigning by the brokerage houses coupled with Stock exchanges and now NSE the premier exchange has also embarked on the same and their emailer reads as below:

National Stock Exchange of India (NSE) wishes you a very Happy and Prosperous Diwali. It is an occasion for family and friends to get closer, be united to celebrate, share happiness and a symbol of prosperity and good luck . NSe has also launched NSEgoldcom site for exclusive ETF information also.

Every household believe that gold purchased during this period is auspicious and remains forever. The luster of gold is too good to resist whether to wear it or invest in it. At NSE, we are taking a few steps to educate investors a smarter way to invest in Gold .

Introducing to you 'Gold Exchange Traded Fund', commonly know as Gold ETF. Investing in Gold ETFs offers you a 4-way benefit:

No premium or making charges on Gold
No worries of theft and so saves money on locker charges
Easy to buy and sell at real-time prices, available on the exchange
You pay no sales tax, securities transaction tax, VAT and wealth tax

Gold ETFs also make it easier for you to invest in gold. You can start with buying just 1 unit at a time, which is roughly equal to a gram of gold. Regular investment over time can help you accumulate a sizeable gold-portfolio. And with Dhanteras around the corner, this is the perfect time to invest in gold.

This Diwali, invest in GOLD ETF, the smarter way to invest in Gold.

To buy Gold ETFs, please contact your nearest NSE Broker today.

Some interesting facts about GOLD ETFs:

Gold has given approx 20% annualized returns over the last 5 years (as on July 2011)
171% growth in assets under gold ETF over last 1 year (AUM of Rs 5090 Crores in Q1'11)
Happy Investing with best equity advisor as we believe in providing quality information free for all to get benefitted.

http://www.geplcapital.com/Campaign/Goldetf.aspx
Buy Gold in the Smartest way

Istart Museek......:lol:

TShyam

September 18th, 2012, 05:43 PM

^^ Why dont you post it in money matters - personal finance thread? It will be much more relevant there na?

kongutamizhan

September 18th, 2012, 06:15 PM

^^ Is there any Gold ETF in India that holds real physical bullion like GLD or the closed end fund CEF?

kongutamizhan

September 18th, 2012, 06:16 PM

http://sphotos-a.xx.fbcdn.net/hphotos-ash4/247767_10151040576297478_2014964215_n.jpg

geico2000

September 18th, 2012, 06:33 PM

Geico,

The reports which are available in the internet are mostly done by the Corportates & their consultants (like our company). Almost all of them have been done from the angle of the FDI companies employing all the management priciples which we learned during our MBA course.

They all look neat & crisp and if every thing happens as per the projections and estimates, then Milk & Honey will flow in India. It can be touted as Win Win for all.

But going by the past practices of the govts and corportaes here (2G, Coal, Power, Irrigation etc), the Govt policies and the profit motives are generally at odds with what these reports profess. We were part of such teams earlier and I quit after seeing the real motives.

I just now came to know that this FDI in retail can not be reversed since the GoI signed all the agreements much earlier but did not inform the country of the same. One TN minister has earned a lot in the process.

Now they are free to do what ever they want irrespective of all the supposed to be restrictions like 30% local sourcing etc. They will know how to circumvent all these.

Now our only hope is to delay the process by the lethargy of our Govt & Babus. The local giant Bharti is with them to manage the local hurdles. :)

Ungala madri oru annachikitta FDI pathi pesikittu irunthen, he referred me to this report, saying that it was done by his colleague/friend and has some good insights.

I can understand the intention of the author but to be fair even I didn't agree with some of their findings and didn't posted them.

As you have more field experience than me (Ungaluku vaisagiduchunu solla :ohno:) I have to accept some of your points on this. Thanks for the explanation. My main pulambal is "Farmers are not getting the price what they deserve for their crops".

TShyam

September 18th, 2012, 07:58 PM

^^ Is there any Gold ETF in India that holds real physical bullion like GLD or the closed end fund CEF?

Yeah I think all the fund houses have a gold etf offering. They are mostly open ended. Not really sure whether they hold physical bullion. But looking at the trajectory the prices are taking particularly in INR, me thinks any fund not holding real bullion will be royally f***ed. No other asset class even comes close to gold's performance in the last 3 or so years.

krishnaswamy

September 18th, 2012, 10:14 PM

is Paper gold is also 1 of the reason for gold price to shoots up?

murlee

September 19th, 2012, 12:29 PM

No express lane for Wal-Mart, rivals in India

For five years, Raj Jain fought to bring Wal-Mart to India.

After finally getting his wish on Friday, now comes the hard part for Jain, country head for the world's biggest retailer, which must negotiate a thicket of restrictions to set up shop in the world's second most-populous country.

Turning a profit in India for global supermarkets is widely expected to prove even tougher than in China, where Wal-Mart Stores Inc loses money after a dozen years and restrictions are fewer than those imposed by India.

Wal-Mart, which has been ramping up its wholesale operation in India, where it operates 17 of the cash-and-carry stores allowed under the old rules, is determined to get its retail business right in a country where even local chains struggle.

"We are able and willing to invest whatever it takes in the supply chain, in the retail formats to move our business forward," said Jain, days after India unexpectedly threw open its doors to supermarkets in the face of heavy political opposition as part of a broader spate of reforms.

Bentonville, Arkansas-based Wal-Mart and rivals such as France's Carrefour and UK-based Tesco Plc did not get everything they wanted.

RETAIL DETAIL

Under the new rules, states can opt out of allowing in foreign players - a choice most seem inclined to make, at least for now - and even in those states that welcome them, stores will be permitted only in cities of at least 1 million people.

Foreign multi-brand retailers will also be required to invest at least $100 million, with half of that going into back-end infrastructure in rural areas, and source 30 percent of goods from small and mid-sized local suppliers.

"We sent our thoughts to the government that 30 percent was very high ... and obviously they looked at that and chose not to amend it," said Jain, who was previously based in Shanghai as head of emerging markets for Wal-Mart International.

"In the short term it's a requirement which probably can be met but as the business starts expanding, the issue will be how ... you continue to comply with it as you would have many more suppliers than you will desire to have," said Jain, who expects it take 12-18 months to open the first India store.

India's organised retail market could attract up to $16 billion in foreign direct investment (FDI) over the next three years, much of that in the farm-to-store supply chain network, according to estimates by Boston Consulting Group.

TOUGH MARKET

The restrictions are meant to appease fierce political opposition that forced New Delhi to backtrack from a similar plan late last year, and could yet scupper the latest push.

The rules add to the difficulties of a $450 billion market already so tough that even Reliance Industries, India's most valuable company and owner of the second-biggest supermarket chain, has never made a profit in retail.

Heavy price competition, expensive real estate, and poor supply chains make for a tough Indian retail environment.

"The market has opened up in pieces and so it is crucial retailers evaluate the returns on their investments over a medium to long term," said London-based Himanshu Pal, director of retail insights with consultancy Kantar Retail.

Carrefour, the No.2 retailer, has taken a more cautious approach in India, where it has opened two wholesale stores.

Milos Ryba, senior retail analyst at PlanetRetail, expects it to maintain that approach: "I don't think Carrefour would change its strategy for India in the short-term. The new FDI law is tricky with many conditions."

Carrefour has declined to comment on its plans since New Delhi's decision.

FRAGMENTED MAP

Only nine of India's 28 states - those governed by the ruling Congress party and its allies - have so far pledged support for the retail reform. Eleven major states ruled by the opposition and some allies of the government have opposed it.

The states that support the move have 19 cities of at least 1 million, including Mumbai and Delhi, India's biggest cities. States opposed have 37 big cities including Kolkata and Chennai.

That patchwork map complicates setting up supply chains and sourcing networks, undermining a key benefit sought from the policy in a country where up to one-third of fresh produce rots before it can be eaten.

"Everyone is optimistic most states will turn around and eventually allow FDI, but the concern is what if they don't open up, or if they take really long," said a senior official with local retail chain Trent, who declined to be identified because he is not permitted to speak with the media.

"Then will there be enough scale on the front-end to justify this kind of investment in the back-end?" he asked.

Trent, controlled by the Tata group, runs the Star Bazaar hypermarkets in a supply chain tie-up with Tesco and the two are expected to join forces to open stores that would be 51 percent owned by Tesco, the maximum allowed under the new rules.

CHINESE LESSONS

Like India, China was seen as a Holy Grail for global retailers drawn by a huge population and rapidly growing disposable incomes.

But China has disappointed foreign retailers as domestic players offered better prices and global operators failed to convince customers their stores had better quality goods.

"India as a market will be even more tough than China," said Harminder Sahani, managing director of retail consultancy Wazir Advisors in Gurgaon, India.

Wal-Mart's Jain said that while China and India are vastly different, they have variety between regions in common.

"... Food habits actually change every 200 kilometers in India. We need to regionalise that assortment. We need to focus on local flavours, local brands and regional brands," he said.

http://profit.ndtv.com/news/economy/article-no-express-lane-for-wal-mart-rivals-in-india-311033?pfrom=home-otherstories

kannan infratech

September 19th, 2012, 02:55 PM

^^ Why dont you post it in money matters - personal finance thread? It will be much more relevant there na?

Shyam,

Idhu Chandai podara thread. Matha threads la chandai poda mudiyadhu... I mean discussions.

kannan infratech

September 19th, 2012, 02:57 PM

^^ Is there any Gold ETF in India that holds real physical bullion like GLD or the closed end fund CEF?

All MFs are supposed to do that. But how many are 100% secured ? That is the question.

kannan infratech

September 19th, 2012, 02:59 PM

is Paper gold is also 1 of the reason for gold price to shoots up?

Yes. Definitely one of the reasons and the price rise is artificial, fueled by the investment companies.

They want to encash during the Diwali season business.

kongutamizhan

September 19th, 2012, 03:30 PM

No express lane for Wal-Mart, rivals in India

http://profit.ndtv.com/news/economy/article-no-express-lane-for-wal-mart-rivals-in-india-311033?pfrom=home-otherstories

This is something that opponents to FDI never consider. To sum up all acadamic studies (Not political, or media studies that could be biased)

1) Even in developed economy all big-box stores together cannot wipe out smaller retailers. (leave alone wal*mart, even combination of Safeway, Walgreens, Wal*Mart, Target etc., can't). A city of over a million easily caters to all of these retail giants plus has room for asian stores, desi stores, local grocery chains for that particular area, etc.,

2) As several studies point out, again Wal*Mart's presence in an area has little or no negative impact in terms of jobs/employment. As can be inferred from most of neutral studies they bring more jobs

3) China and Latin American studies suggest that small businesses are equally competitive if not more. And you know what? Consumer wins

4) Further retailers have to deal with unknown terrain. Add to it an already high entry barrier which is a protectionist measure IMO.

5) Finally it will continue remaining as a decentralized policy. States have their say. In De-centralized matters such as this what right does it give people in state A to say that FDI is not required in state B? What Mamta is doing now is exactly this. If she thinks her state don't need it let her choose not to implement it there. She doesn't have any right to threaten CG to rollback. In fact I am thinking that CG's framework should have been leave it up to the cities/districts so that even SG's can't play politics

6) Last but not least the retail chains have to face the same infrastructural barriers like annachis and small businesses. (like bad roads, powercuts, corruption, etc.,). With them on play some improvement will happen on that front which otherwise won't

satchitananda

September 19th, 2012, 03:58 PM

Shyam,

Idhu Chandai podara thread. Matha threads la chandai poda mudiyadhu... I mean discussions.

:horse: sari vanga pazhagalam.. :D

satchitananda

September 19th, 2012, 04:16 PM

1) Even in developed economy all big-box stores together cannot wipe out smaller retailers. (leave alone wal*mart, even combination of Safeway, Walgreens, Wal*Mart, Target etc., can't). A city of over a million easily caters to all of these retail giants plus has room for asian stores, desi stores, local grocery chains for that particular area, etc.,

Comparison is bit of an over reach. Secondly without ensuring that the benefits will translate to the people at the end of the pipeline.. not just customers, but also farmers, rural folks.. this may be premature timing. Besides Cong seems to be inventing a new reason for its scam season..

2) As several studies point out, again Wal*Mart's presence in an area has little or no negative impact in terms of jobs/employment. As can be inferred from most of neutral studies they bring more jobs

IMO, again very wrong comparison. Its not just the jobs like annachi kadai folks will perhaps end up working in walmart type stores thats the question, I think Kannan, also highlighted the fact that there will be pressure downstream like in rural areas.

3) China and Latin American studies suggest that small businesses are equally competitive if not more. And you know what? Consumer wins
Consumer wins.. sorry... at this current inept government INFLATION seems to be the only winner... Yes this move can help arrest that trend.. but a) it will take time, b) thats also one of the reasons for the govt doing this, so that they can escape with all the scam loot and appear being effective.

4) Further retailers have to deal with unknown terrain. Add to it an already high entry barrier which is a protectionist measure IMO.

Are you being so naive.. which retailer will go 100%.. usually they will get some big shot local guy to navigate.. remember we have trained them well with ETTAPPANs.. Ford-Mahindra... remember... Our local greedy guide will train them only to get kicked out.

5) Finally it will continue remaining as a decentralized policy. States have their say. In De-centralized matters such as this what right does it give people in state A to say that FDI is not required in state B? What Mamta is doing now is exactly this. If she thinks her state don't need it let her choose not to implement it there. She doesn't have any right to threaten CG to rollback. In fact I am thinking that CG's framework should have been leave it up to the cities/districts so that even SG's can't play politics

6) Last but not least the retail chains have to face the same infrastructural barriers like annachis and small businesses. (like bad roads, powercuts, corruption, etc.,). With them on play some improvement will happen on that front which otherwise won't

They have deeper pockets to handle this, besides they know what they are getting into. They will not be on same plane as Annachi kadais. First of they have more business clout and they can wrangle the govt with big investment numbers. Two being establishments that span the nation (when they come), they will have more money power and clout.

The idea that certain SG wont implement is bizarre logic, as governments can change like in TN. If you dont like mono, wait five years and if you do , wait eight more..kinda deal..

The support system to avoid making behemoths out of our money is more crucial than immediate implementation.

TShyam

September 19th, 2012, 05:07 PM

Shyam,

Idhu Chandai podara thread. Matha threads la chandai poda mudiyadhu... I mean discussions.

Neenga ithukku sari pattu vara maatenga. Naan cross post pannikaren.

@ Kris: Short answer - yes.

kongutamizhan

September 19th, 2012, 05:27 PM

@ Satch,

LOL!! You seem to have a vaikaal varappu thagararu with big-box retailers. Looks like you have hatred for big companies as well :)

First of all when I say consumer wins you have to understand that producers are also part of it. Producers are consumers of something for which they don't produce and pay more today. As you pointed out inflation is the reason. A farmer who grows vegetables still have to buy wheat, rice, meat, other grocery items like curry power and his household items from outside market. So yes farmer (though a producer in one case) will remain a consumer too. FYI money saved is also money earned.

Bottomline all producers are consumers and not vice-versa. So we have to look at the perspective of what is good for larger population, which in this case is 100% of the population. Above that I think producer winning as a producer is also possible with FDI.

And NO you cannot brush off every study as wrong. They may not be a study of effect of FDI in retail with respect to Indian market, but they are comparable studies. Neither they are pre-mature. No walmart or even a combined attack of all retail giants is going to kill local retailers or jobs. Yes I am also talking from the perspective of beyond jobs (and I don't know why you consider jobs as unimportant). If you want to talk of jobs outside retail then talk about 30% sourcing clause and ancillary industries. Talk about our population and diverse needs. Culturally our needs are diverse than US and there won't be one-size-fits all products. There are several niche markets to play around.

At the risk of repeating myself I am saying this again. If Wal*Mart can't kill other wholesales like Costco or BJs, if walmart selling shoes can't kill other shoe retailers like footlocker and payless, if walmart selling furniture can't kill ikea and if ikea selling furniture can't kill Ashley's, Harlems or Rooms-to-gos, if walmart selling inners can't kill victoria secrets, if walmart selling groceries can't kill other local grocery stores and hispanic businesses, if walmart selling electronics didn't kill Best-buy or FRYS (It's Amazon that'll eventually kill it and that is known as competition), if walmart by selling multi-brands can't kill malls and outlets then what are you worried about? These are not fictions, they are facts. Apparently you seem to believe more in Walmart than Walmart CEO himself :lol: More populated a city is walmart in-fact attracts more businesses and again the studies that mention it are not paid studies. They are acadamic studies. I also gave you another comparable study in Chicago. I can't give any other example because this is the only megacity where walmart is within city area (yet) and population is comparable to Indian cities. China study too states that small retailers control lion's share even after FDI. Endha study'um analyze panna matten naan pudicha muyalukku moonu kaaluna onnu solrathukku illai.

Going by your logic big businesses are bad because they have more money and enjoy clout. You know what? It is not much different from communist thoughts. Where government has to intervene is to form guidelines and make sure that does not create ground for monopoly and take care of environmental regulations and leave it there. (And yeah they have to enforce it too). If a person makes money then don't try to punish him like Obama. Unless you want to go back to government investments and public sector companies you need them to create jobs. Big or small you want businesses to succeed and not fail. Successful businesses are good for society. After all ultimate aim of every small business whether it is a potti kadai or Kannan infratech :D is to grow big. So how can you say that intentions to grow big is ambitious/not-wrong, but actually growing is?

Like I said before as a monkey climbs up the tree more people can see its ass. Do you think that annachis, nallis, pothys, reliance guys don't have political clout today? So are you okay when these folks enjoy political clout? Were you okay with sumangali cable monopoly before? Competition is good and it is us consumers (100% of the population) that is going to benefit. If monopoly can be tackled in India it can be done only by competitors with deep pockets. We need them for our own benefit more than vice-versa. If China and Latin America are not affected, we are unlikely to be affected negatively in a big way. Our model and criteria is better than the other countries that allowed FDI (or worse depending on how you look at it). I rest my case here unless you have anything new to say.

satchitananda

September 19th, 2012, 06:27 PM

Just for records, have nothing against any stores. Nor is it governed by some bad experience at walmart :D.

I agree 100% that the inefficiencies in the current Indian system has to go and the benefits will definitely trickle down. I guess you didnt get the only major point, i was trying to tell. Its not that farmers/producers are not consumers of other stuff. It is just that our society still has large percentage of labor market as rural based.

Without ensuring a proper mechanism that more of the benefits come from this introduction, rather than side-effects, usually unplanned for, the intro may be premature.

If they already have such mechanisms, then either they should be highlighted (not merely implied) as explicit policies.

I am all for enterprenuership .. with a more emphasis on the local content.. perhaps thats the difference.. Objectively saying that let the winners win, its my desire that the people of the land win.. (well i didnt say loot... before you give it a twist)
.. every small company would like to grow big.. In a corporation run society, its ultimately the investors who dictate... NOT the consumers..

Again, in a media frenzy consumerist society, where sensationalism sells, it makes no difference, if its an indian co. or foreign thats making us a fool .. AGREED.

Again, I rest my case as well. If the focus is not in benefiting the land, then the focus is wrong. If the people are not convicted, then the govt has to do that first, esp for such major changes. Its easier to fix few things now, before the horse is out of the barn.

kongutamizhan

September 19th, 2012, 06:56 PM

^^ It is East India company mindset that all foreign companies loot. Any foreign company whether Walmart, Target or TESCO they are all here to stay and continue running the business worldwide profitably. Everyone knows that their looting or un-ethical practice in one country will imact their business in the other. Free-trade is a two way street and NOT a one-way. You cannot have the cake and eat it too.

You cannot keep siging trade agreements by asking for access-key to their doors and closing your door for others. Participative economy increases opportunities for every stakeholder involved.

In what way you think the focus is wrong? Yes congress is corrupt. It is very much possible that they are doing it as a diversion tactic. But that doesn't make it a bad move IMO. Whatever their motive is, FDI in retail is a well thought out plan and deserves issue based support IMO

satchitananda

September 19th, 2012, 07:04 PM

^^
Nope nothing related to East India co. Wrong comparison. I highlighted that you will twist it as loot and you seem to vindicate my read.

I am all for enterprenuership .. with a more emphasis on the local content.. perhaps thats the difference.. Objectively saying that let the winners win, its my desire that the people of the land win.. (well i didnt say loot... before you give it a twist)

While you seem to be arguing for FDI, I am not arguing against it... If you re-read all my posts.. I have been asking for strengthening mechanisms where our guys can even compete on same footing.. Please dont tell annachi's can be on the same financial strength as walmart or tesco or target.. unless you are calling ambani and tata as annachi..

kongutamizhan

September 19th, 2012, 07:21 PM

I have been asking for strengthening mechanisms where our guys can even compete on same footing.. Please dont tell annachi's can be on the same financial strength as walmart or tesco or target.. unless you are calling ambani and tata as annachi..

Like how? Are not the sourcing clauses, 1 million city regulation, SG autonomy, 50% investment in backend infra etc., not part of strengthening?

What else you want to add to strengthen it? Give 30% profits to annachis and middlemen so that MM can continue to get some income without adding value? :lol: :jk:

IMO that's where respective state government's implementation comes into picture. They don't even have to put in any crap in name of strengthening. All they have to do is enforce CG's standards.

geico2000

September 19th, 2012, 08:34 PM

Any exit from the Federal Reserve's extraordinary monetary stimulus is still far off, Jeffrey Gundlach, noted bond investor and CEO of DoubleLine Capital told CNBC’s “Squawk on the Street” on Wednesday.

“I think it will be more likely that the Federal Reserve buys all the Treasury bonds that exist than starts selling them,” he said.

The man some have dubbed as "the new bond king" —challenging the mantle anointed on Pimco's bond guru Bill Gross — added: "I have no concept of what an exit strategy would look like.” (Read more: Fed's 'QE Infinity': Four Things That Could Go Wrong)

http://www.cnbc.com//id/49086734

dpitchai

September 19th, 2012, 09:33 PM

Orgamised Retail may succeed only if all stake holders are educated, knowledgeable and fear laws & pay taxes.

Agree 100%

iaafosc

September 20th, 2012, 05:00 AM

Just curious, will it happen ???? I know Tn is unanimously against it and all but..

Likely to be located on the outskirts of cities as shopping hubs, the places being explored are around Delhi, Mumbai, Bangalore, Hyderabad and Chennai. Quite like what you find in other international cities, the ones in India would be complete with a cafe, restaurant, library and nursing stations.

http://business-standard.com/india/news/ikea-may-setfirst-store-in-3-yrs/487008/

murlee

September 20th, 2012, 05:28 AM

IKEA comes under FDI in single brand retail.. No one has opposed this..

So yes, IKEA can set up where ever they want in India.

kannan infratech

September 20th, 2012, 11:09 AM

Different ways to invest in gold

http://www.indiastudychannel.com/resources/146142-Gold-investment-overview.aspx

For centuries, gold has been considered as a robust asset preserver and it has become prudent to be aware of various methods to invest in gold to minimize the risks against its cost rise, inflation, stock market ups and downs, or geopolitical status. This article portrays an overview of gold investment including factors influencing recent spike in goldprice, why do people invest in gold, different ways to invest in gold in India and drawbacks involved in gold trading and investing.

Prologue

Raguram, a government employee has a daughter whose wedding has been planned a few months down the line. Bala, Raguram's friend of the same class also has a girl child undergoing college education. Let us see the issue of gold price transfix from the perspective of the above two parents. Raguram seems to be upset at this time with huge gold price hike in a short duration indicating no signs of coming down. In our Indian traditional wedding (even normal) like any parent to make enormous expenses on gold jewelry as a gift to the daughter (Since it has become a custom offering gold jewelry to daughter for any Indian parent) he too did have plans to spend on large amount of gold jewelry for his daughter. But the extent the price of gold has surged over the past one year from Rs 12,000 plus per 10 grams to 20,000 plus per 10 grams drowns the parent in great distress like Raguram as how to make up the amount of gold for jewelry at this hiked price. In contrast to Raguram, Bala just keeps his head cool with already having planned investments on gold in the form of goldETF funds, coins and certificates as savings and very much in comfort zone. In this context, we need to analyze the factors behind this impetuous spike in the cost of this centuries-old substance.

Factors influencing the recent spike in gold price

Since the ancient times gold has been exchanged as money for commodities and later acts as a relative standard for currencies of different countries or regions. In the last quarter of the 20th century a flat currency system was fixed in view of the unilateral suspension of converting US dollar to gold directly by the US government. Since then gold has been traded continuously throughout the world based on the global gold-trading markets. At the earlier part of the year 2008, with the outbreak of recession in the global economy, almost entire stock markets worldwide including US, European and Asian countries had gone through a fiscal turmoil. A complete crisis had affected all major assets in real estate, equity and commodity market yet gold has remained superlative withstanding the situation. Of late, the financial deficit in the US economy along with liquidity crisis has paved the way for US dollar depreciation against major currencies of the world such as the Euro and the Yen of Japan. This depreciation in the value of US dollar bumps up the gold and fuel prices due to the negative relationship between these two. Following factors influence the recent spike in gold prices.

Major influencing factor for the latest price hike in gold has been the depreciation of US dollar versus major currencies in different parts of the world.

Gold is regarded as a secured asset preserver at times of instability of the world economy. Due to this leading to speculation for inflation rise along with excessive liquidity demand for gold raises the price.

On account of recent devaluation of US dollar, diversification of investment portfolios on gold by the central banks of various countries becomes the crux of the matter. For example, the Reserve Bank of India purchased gold to an extent more than $6 Billion from the IMF treasury lately.

Another factor influencing gold rate has been the supply being disproportionate to the increased demand for gold. Developing economies like the BRIC (Brazil, Russia, India and China) has increased their investment on gold and hence their consumption goes up but with global gold production not meeting with consumption.

The launching of commodity funds especially in gold and silver and the purchase of these commodity funds has contributed to the incremental demand for gold and simultaneously gold rate as well.

Merchandizing with dollar does influence gold rate too. With almost zero percent interest rate offered in the US economy to curb inflation, public intend to borrow and make investments on real estate, equity funds, commodities such as gold and silver.
Issues concerning geopolitics and crude oil prices do have impact on gold prices. The conflicting wars among the US, Israel, and Middle East countries (leading oil suppliers) impacting crude oil prices and these in turn pushing up the gold prices.

Presumptuous speculations in the stock market trading and commodity trading also would be the driving factor for gold values.

Why do people invest in gold?

It is essential to study why do people invest in gold and gold being the most quondam currency has been greatly desired as a portfolio diversifier all over the world.

Investors prefer gold as a tool for investment for its robustness that has always long term validity. Markets with other commodities and currencies may rise or fall but gold sustains its value for centuries together not impacted much by the market trends.

Gold remains to be a secured investment haven at times of economical or any geopolitical crisis such as conflicts or natural calamities. These crises negatively impact on belongings like currencies, equities, and bonds but do have positive effects on gold appreciation.

Acting as a protection against inflation, its purchasing power continues to be stable and on the other hand, value of currencies tends to decline during inflation.

Investment in gold is an ideal option for individual portfolio diversification. Many researches reveal gold to be considered as a significant and consistent financial portfolio amidst other sorts of assets like real estate, bonds or equities in view of its secured haven feature.
Gold is a resource that can be easily tangible and has liquidity dissimilar to real estate asset, which is tangible but has no easy liquidity feature and bonds/equities/shares, which can be of liquidity but has no tangibility.

As an asset gold can be outrightly purchased and has no territorial limitations.
In addition to its benefit of asset class, many people are desirous to invest in gold for its lustrous, aesthetic appealing and for social and religious customs as well.

On account of its durability and perpetual characteristics, gold is a sort of safe investment.

Different ways to invest in gold in India

On overview of gold investment, there are different ways that gold can be secured for investment purposes not only in India but across the borders also. This is ranging from traditionally adorned gold jewelry, gold bullion coins or small bars, gold ETF and e-gold to mining stocks and certificates. Investing in gold depends on the requirements and prospects of the investors. Prior to give a thought to invest in the yellow metal investors should decide the best form of investment in terms of convenience, convertibility and choice. Some of the popular and different ways to invest in gold in India are as follows.

Investing in gold coins and bars

Minting of gold coins in history dates back earlier in the 6th century in Turkey, (formerly it was the Kingdom of Lydia in western Asia Minor). Gold coins were minted from the gold dust obtained from the mines and the sands of the River Pactolus near the Aegean coast of Turkey. Since then gold coins are the most recognized method of asset storage of gold. The most attractive way of investing in gold in minimal amounts for individuals has been bullion coins and bars. Gold that has been bought for investment mode has been given exemption from VAT (value added tax) in most of the countries.

Gold coins

Gold coins can be obtained in weights widely ranging from five, eight, ten, twenty, fifty grams, etc., through various means of dealership. The market value of gold coins has been calculated based on the purity of the gold minted as coins across the world such as 14 karat, 18 karat, 21 karat, 24 karat, etc.

While having thought about the purchase of gold coins most of the purchasers will go for local dealer in jewelry. But there have been a lot more choices at present. In India, nationalized banks, post offices offer wide range of denominations of coins for investment purposes. In regard to buying gold from reputed banks the quality of the gold remains the best. But it is not beneficial from the standpoint that the banks are charging premium on the coins in general that might not be the case whereas no high premium on purchasing through local jewelry shop. Moreover, banks do not have any buy-back gold offer while almost all jewelers accept gold if they have been resold either for cash or for gold coin or jewel. Buying gold coins through a few post offices here in India is another option but chargeable with least premium not to the extent that has been priced by the banks, again no buy-back gold offer. Gold coins can also be purchased through some legitimate online retailers that seem to be a bit expensive. For instance, a 2-gram gold coin with 99% purity from online store might be priced at Rs. 3986 as against same coin with similar purity from any bank could be bought at Rs. 3,760 that has been obviously high price.

Gold bars

Gold bar usually are available in different sizes and weights. Gold bars are of 50 grams, 100 grams, 1 kg, 1 ounce, 10 ounces, 100 ounces and 400 ounces to be the highest denomination with 99.5% purity of gold. Gold biscuits or wafers are other names for thinner bars. There have been nearly 110 recognized gold bar producers and are brands in 27 countries across the world. A few popular gold refineries around the globe have been bar manufacturers from Europe, South African and Australia Credit Suisse, Johnson Matthey, PAMP Suisse, UBS, Rand Refinery, etc.

In India, gold investment in the form of bars are known as TT bars (10-tola bars) as the conventional measurement of gold in India is being tola, the term originated from 'tula' in Sanskrit that means measurement scale/balance. Yet these are outdated and 100 gram bars are famous at present. The gold bars are available at the prevailing market rate in addition to 1% VAT, may vary slightly depending on the marketers, locations, fineness, etc. with purity more or less 99.5-99.9%. Since the war between India and China in 1962 Gold Control Act was introduced according to which certified dealers alone could own pure gold coins or bars and individuals were restricted to possess pure gold coins or bars. However, after scraping the Gold Control Act in 1992 individuals also can hold gold coins and bars.

In the Indian market, gold bars can be obtained from the Minerals and Metals Trading Corporation of India that has offices throughout the country. Local jewellers as well as dealers sell gold bars too. Gold bars also are sold through some banks involving in bullion trade like the Bank of Nova Scotia in India, which make imports and sales of the gold bars. However, individuals may not be serviced by these banks that choose selling gold bars in large quantities to its regular customers.

Gold futures and options as an investment

Gold futures

Gold investment can also be made in the form of gold futures contracts through the derivatives or commodity market in India. These gold future contracts are borrowings in terms of gold that allow the investors to buy a fixed amount and purity of gold at a given price on a specified date in future. The investor has to make some cash deposit initially to the agent, which has been a small percentage of the gold price in the future contracts. The main factor to decide the futures prices has been the speculation in the market that the holding costs should be at the specified period. The holding costs consist of the interest for borrowing gold in addition to charges for insurance and storage costs. The futures prices will generally tend to be higher than the price of the gold that can be obtained on the spot, i.e., the spot price. Gold futures trade has been through MCX, NCDEX and NCME commodity exchanges in the Indian trading market. Gold futures contracts on the MCX commodity exchange market are being traded with a variety of contracts similar to Gold Guinea (8 grams per unit), Gold Mini (100 grams per unit), Gold HNI (1 kg per trading unit), and so on. Yet, investors in gold futures contracts should be aware of the risks involved prior to making investments in gold futures since they may have significant profits as well as equivalent losses with the probable adverse effect of gold price.

Gold options

The investment in gold options permits the investor to just hold a fixed quantity of gold at a fixed price (strike price) on a specified future date without any obligation to purchase (call option) or sell (put option). The factors influencing the price of gold options may be the current spot price of gold, rate of interest, unpredictability, expiry period, and pre-agreed price also known as the strike price. The higher is the strike price the lesser expensive would be call option and more expensive the put option. Similar to gold futures contracts, investing gold options also benefits the investor to have adequate leverage. Also, if the strike price has not been reached, no obligation to make use of the option is required. Hence the investor's loss could be minimal just to the premium made up for the gold option. This gold futures and options trade can be done through brokers like shares through share agencies.

Gold exchange traded funds (ETFs)

Since gold being an ideal asset to invest, one of the best ways to invest in gold for small investors should be through gold exchange traded funds. ETFs have high liquidity, lucid pricing and also facilitate portfolio diversification. ETFs enable the investors or capitalists to have better means of cost-efficient and secured investing portfolio through gold bullion market without holding physical gold. The stock exchanges all over the world have engaged in trading of gold exchange traded funds and exchange traded commodities. Gold index is normally being pursued in the gold exchange traded funds in India and this trading has become quite so popular with skyrocketing of gold price.

Initially, let us see what is gold ETF? Gold exchange traded fund shortly ETF, also called as paper gold, is actually a kind of mutual fund to invest in standard gold bullion with 99.5% purity and its value depends on the prevailing gold rates. It performs like shares or units trading as in the case of intra day stock on stock exchanges. Investing in gold ETFs is a less expensive and a suitable substitute to own gold physically for small investors. Because of this distinct feature of providing benefits of both mutual fund as well as of a stock gold ETFs are considered to be the best hybrid investment instrument.

In March 2003, the first gold ETF was launched in Australia globally though originally the idea of launching gold ETF was proposed in India by Benchmark in 2002 but scraped due to legislation disapproval by the Indian government. Ultimately, first gold exchange traded funds in India was instituted by Benchmark in February 2007.

Gains from all Gold ETFs schemes have been more or less same as of physical gold since these funds have been passive investments corresponding to the performance of gold in the spot market. The value of each unit in gold ETF is approximately 1 gram of gold. However, certain funds issue units equivalent to 0.5 gram of gold also.

Returns from gold ETF is subject to taxation as per non-equity mutual funds but exempted from wealth tax. If it holds duration less than a year the gains can be taxed under short term capital gains tax (STCG) and long term capital gains (LTCG) if duration is more than a year.

The investors need to have a trading account with a stock exchange agency who must be the member of NSE and DMAT account for gold ETF trading. Current gold exchange traded funds in India with their NSE symbols are as follows:
1. Gold Benchmark Exchange Traded Fund (GOLDBEES)
2. UTI Gold Exchange Traded Fund (GOLDSHARE)
3. Kotak Gold Exchange Traded Fund (KOTAKGOLD)
4. Reliance Gold Exchange Traded Fund (RELGOLD)
5. Quantum Gold Exchange Traded Fund (QGOLDHALF)

Invest in gold via E-gold

Besides the conventional means of investing in gold such as buying gold jewelry, coins, bars or biscuits from jewellers and banks, over the past few years various electronic forms of holding gold as an investment tool and E-gold as such has been the latest amongst them. E-gold is an electronic form of owning gold, simply a digital method of investing in gold. It entitles the investors to change the ownership also.

As a commodity exchange in India the National Spot Exchange Limited (NSEL) was established by Financial Technologies India Ltd in association with National Agriculture Cooperative Marketing Federation of India Limited (NAFED) for trading in commodities such as gold, silver and agricultural products. NSEL initially started trading in e-gold in March 2010. Similar to trading in shares, e-gold units can be traded through the NSEL and one unit of e-gold equals to the value of 1 gram of gold. For purposes like wedding of children or any other savings, investors can invest in e-gold in small amounts through the demat account for certain tenure, mostly long-term. At the end of specified time-period, the NSEL deliver the physical gold to the investors. Or else, they can sell the units and exchange them into currency. While investing in e-gold, since it is electronic form of investment investors need not concern about purity issue, insurance risk, storage expense, economic, inflation, devaluation threats, etc.

To invest in e-gold units, the investors are required to start a demat account (beneficiary account) with the paneled Depository Participants (DP) enlisted in the NSEL web site. The small investors trade through e-gold units with their agent via phone or the web site.

The NSEL collect levies Rs.20 as turnover charges per one lakh for both buyer and seller and also storage charges on monthly basis. The billings are computed on the basis of the holding in the accounts of the investors at the end of every month (last Saturday of the month). The charges applicable per unit e-gold every month will be 60 paise, 1% VAT for conversion of e-gold into physical gold as per the current rates and octroi of 0.1 % of the value of delivery (delivery charges if from Mumbai).

Gold certificates

In ancient times, gold certificates as a constituent of the gold standard were issued in terms of dollar denominations by the US Federal Bank. The investors who hold gold certificates could convert these into gold equivalent to its value. Currently these gold certificates issued by the US Treasury have been driven out of the global market. In modern times, investors can hold gold certificates but not been possessing physical gold. Gold certificates can be obtained from individual private banks. By holding the certificate, the investor is the owner of the gold whereas the bank will have physical possession of the gold on behalf of the investor. The investor also can have liquidity of the gold wholly or partially through the bank and this has been exempted from taxation.

In India, SBI, the largest public sector bank has brought back the gold deposit scheme by issuing gold certificates to the investors at some selected branches. This scheme has been launched again to bring in the excess gold in circulation owned by individuals, temples, and trusts and to cut down the nation's gold imports, offering interest to the investors as well. The bank will issue the certificate on purity of gold after the purity check of the gold deposited in the bank and the investor can claim back their asset when the certificate matures. Interest is calculated in the form of grams but not in the form of currency. For instance, 5 grams of gold as a compound interest for 500 grams of gold for three years can be earned annually. At the maturation period, interest gained will be exchanged for rupees equal to gold at that time for the investor. Both the investment and interest is exempted from taxation such as wealth or capital gains tax.

Investment through gold mining stocks

Investing in stocks/shares of gold mining and exploration firms is another way of financial gaining through gold. Global capitalization of gold mining sector has been around $220 billion and more than 300 gold mining companies have been engaged in trading on different US stock exchanges. The value of the shares of gold mining firms bump up in tandem with an increase in the prices of gold in the spot market and the futures markets profiting the share holders of the gold mining firms. Also there are mutual funds issued by these gold mining companies through which gold investors can pick up shares of those firms. A combination of the factors such as the maturity and geographical location of mines, gold reserves, ore grades, expenses involved in mining and exploration, margins, balance sheet, debt profile and management of the mining firms may induce share pricing and valuation of gold equities. Some of the leading worldwide gold mining companies are Barrick Gold Corporation, Goldcorp, AngloGold Ashanti, Newmont mining corporation, and Kinross Gold Corporation.

Gold mining and exploration in India has been in fact very minimal. It is surprising that not much gold mines are in the country, the people of which spends so much on gold. The only gold mining firm that has been named in the stock exchange in India is the Deccan Gold Mines Limited company garnering revenues from gold exploration. Hutti Gold Mines Company in India possessed by the Karnataka government has been the single gold mining firm that mined about 2.5 tons of gold last year with Rs. 95 crores of profit during the year 2009-10. The DSP BlackRock World Gold Fund guides the gold investors to get exposure to global gold mining stocks.

Investment in gold warrants

Another means of investment option by individuals in gold are gold warrants. Basically, warrant is a financial tool that enables the possessor of warrant to purchase share of the firm issuing gold warrant at a fixed price on an intended date in the future at the payment of premium. As in the case of the gold futures, gold warrants too have leverage to the price of the gold. Gold warrants have been mostly issued for stocks of the mining firms or mints. However, these types are not much famous in India due to the fact that only a few mining firms are engaged in the Indian gold market.

Gold accumulation plans or chits

Gold accumulation plans or chits, the most common means of financing in gold resembles to conventional savings method in which a fixed amount is saved in terms of gold on a monthly basis. This lets the investor to buy gold at the fixed sum and this deposited amount each month could be little, but purchased over the tenure of long-term and hence no premium is chargeable on small coins and bars. At the end of the plan period or if the investor's account gets closed s/he can avail gold in the form of jewelry, bullion bars or coins, or if opted for outright sale of gold s/he also could get cash for gold purchased.

Drawbacks involved in gold investment

While contemplating the idea of investing in gold, investors need to focus on various rationalities as to why gold investment may not be the best perception. At this juncture of gold price touching dramatically sky heights investors must be aware of the drawbacks involved in the choice of investing gold as a portfolio diversifier.

Investment in gold does not provide any sort of earnings or returns in contrast to that of the gains through stocks, bonds, equities and other assets as these will offer the investors a definite return.

Since no financing involved so there is no leveraging to amplify wealth building.

The investors may not derive any tax advantage as against of other asset classes.

In contrast to rental income gained from the real estate, there is no potential income from holding gold through banks or brokers.

Gold investment is subject to arrogation though there may be contention that accumulation of coins are protected from confiscation as at some point this protection may be taken off by means of regulation.

Gold being a precious metal is prone to be manipulated to subdue the value indirectly to boost paper currency.

The myth of high liquidity of gold but in reality there are hidden costs in buy-back gold purchases and while liquidating the commodity of gold investors are charged with 1.5% premium for melt-down process in addition to shipping or handling or insurance expenses.

Investors need to realize the pros and cons while investing in the glittering metal that its price is primarily influenced by political and economic affairs around the world. There are certain moments that gold trading or investing sounds well and it will not at times. To have effective trading or investing with this cherished metal one must sense all about those investment benefits and risks. S/He must understand when to trade and when to invest since it is being unpredictable when gold would swing up and down.

kannan infratech

September 20th, 2012, 11:57 AM

Why Physical Gold is better than Paper Gold ?

http://www.roadtoroota.com/public/564.cfm

WORLD GOLD COUNCIL SUPPORTS GOLD PRICE MANIPULATION!
Bix Weir

For years my friends over at the Gold Anti-Trust Action Committee (GATA) have been claiming that the World Gold Council (WGC) is a puppet organization funded by the very banking cabal that suppresses the price of gold. In the early days of this 10 year old gold bull run most people brushed off GATA's comments as coming from people who wore "tin foil hats" and saw conspiracies in everything.

But nobody really gave a good explanation as to why the industry's largest gold advocate organization, the World Gold Council, was always touting the virtues of Gold Jewelry over and above the monetary purposes of gold in all their marketing campaigns. Millions of advertising dollars were spent glorifying the virtue of gold necklaces to enhance a woman's skin tones and how the gift of a gold bracelet was sure to lead to a lifetime of romance.

While the WGC was promoting gold via jewelry sales, the GATA Army was scouring government documents, writing letter to their elected officials, uncovering incriminating evidence and suing the guilty parties for their involvement in a vast conspiracy by banks and governments to serendipitously suppress the price of gold.

In a nutshell, the World Gold Council has stayed silent while the obvious market manipulations suppressed the price of the ONLY thing they were supposed to support...GOLD! All the while GATA has been busy freeing gold from the clutches of the rich and powerful that control the price on a daily basis.

The really twisted part of it is that where the World Gold Council has an operating budget in the multi-millions of dollars funded by donations from gold miners and banks, the folks at GATA operate on a shoe string budget funded by paltry donations from individual investors that are tired of being robbed by the bullion banks. Even given these facts the amazing truth is that...

GATA DESERVES MORE CREDIT FOR THE 10 YEAR PRICE APPRECIATION OF GOLD THAN ANY OTHER ORGANIZATION IN THE ENTIRE GOLD INDUSTRY!

So where does the World Gold Council stand now on supporting the price of gold? Clearly they have benefited from the monumental rise in the price of Gold so wouldn't you think they would go all out in support of Gold market issues that may help gold gain a stronger foothold in investment portfolios, support a higher price and stop the rampant market manipulation?

NOT A CHANCE!

If there is one tool that is used most in the price suppression of Gold it is the concentrated paper gold selling that takes place on a daily basis on the COMEX and LME. As our good friend Jeffrey Christian of the CPM Group so eloquently put it... paper gold trades in multiples of 100 times the amount of physical gold. So when the CFTC presented the world with the opportunity to voice their opinion on whether this concentrated paper manipulation should be curbed or stopped which side do you think the largest Gold advocacy group came out on?

THEY ARE VEHEMENTLY AGAINST THE NEW POSITION LIMITS RULING!

If you don't believe me just read the comment they posted on the CFTC website:

http://comments.cftc.gov/PublicComments/ViewComment.aspx?id=34001&SearchText=world%20gold%20council

Here are some highlights:

"the World Gold Council is concerned that the Proposed Rule extends beyond the legislative intent of the Act and, if implemented, could reduce or impair liquidity and trade in the gold market"

"the World Gold Council requests that the CFTC withdraw the Proposed Rule until after the CFTC is able to determine whether position limits are, in fact, necessary with respect to each of the Referenced Contracts and their economic equivalents."

"The World Gold Council encourages the CFTC to update the proposed definition of deliverable supply to reflect the more flexible settlement options for physically-settled commodity transactions, and thereby expanding the definition of deliverable supply"

"The World Gold Council also requests that any of the proposed regulatory and recordkeeping requirements associated with position limits and bona fide hedgers be delayed and phased in to the market."

As you can tell the World Gold Council is pulling out all the stops to try and destroy the CFTC position limits rule which would help free the price of gold from the market manipulators.

The big question: WHY is the WGC so against the implementation of Position Limits? The answer can be found in the "Investment Partners" portion on their website:

http://www.gold.org/investment/partners/

The World Gold Council is partners in the other powerful tool for gold market manipulation...the Gold ETF's and especially the KING of gold market rigging operations GLD!

For those who have not made the connection between Gold ETF's, the COMEX shorts and the price manipulators I ask you to read an article I wrote a few years back:

Who's The Little Man Behind The Curtain?

http://www.roadtoroota.com/public/133.cfm

There has also been many articles about JP Morgan being both the Custodian of the largest Silver ETF (SLV) while at the same time the suspected huge COMEX silver short. As analyzed in the above article it is clear to me that the physical metal in the ETF's is being used to justify the large concentrated short positions that are used to rig the prices of gold and silver.

Interesting enough this same issue is highlighted in the letter written to the CFTC by Senator Carl Levin in support of Position Limits.

http://comments.cftc.gov/PublicComments/ViewComment.aspx?id=33866&SearchText=levin

"The proposed rule would help put an end to excessive speculation and market manipulation in U.S commodity prices by creating the regulatory infrastructure needed to establish position limits across U.S. commodity trading venues, including futures and related derivatives markets, and across a variety of commodity related trades in agriculture, metals, and energy markets."

"the proposed rule must make it clear that the new position limits will apply to derivative dealers and speculative traders that buy or sell commodity-related instruments, including index traders who trade commodity-related index swaps, and financial firms that sponsor commodity-related Exchange Traded Funds (ETF's) or Exchange Traded Notes (ETN's). These commodity-related financial instruments are designed to allow investors to profit from changes in commodity prices without having to purchase the actual commodities or manage a portfolio of commodity investments; they are inherently speculative and, in the aggregate, can have a significant effect on commodity prices."

These are some pretty big words aimed at our totally corrupt markets! And don't think for a minute that this came from some Congressional lackey that doesn't know what he's talking about or have any real power. Senator Carl Levin is the Chairman of the Permanent Subcommittee on Investigations for the United States Senate. Basically, he's one of the leaders in the battle to take down the Banking Cabal!

I could go on for days about all the comments I read regarding the Position Limits Rule that were posted on the CFTC website as the true "Good Guys" and "Bad Guys" have come out of the wood work on this one. As the crooks at BlackRock commented..."The Commission's position limit proposal may well have the most profound impact on our clients, our business and the markets we use of any Dodd-Frank proposal the Commission has issued".

THAT'S HOW IMPORTANT THIS RULE IS!

Make no mistake...the end of market manipulation means the end of un-backed fiat money as history has shown again and again that no un-backed currency can survive on it's own without controlling the prices of gold and silver.

The only question left is WHEN will the final ruling come down. Will it be implemented before the global market chaos hits or will is come after?

Either way something wicked this way comes so be ready.

May the Road you choose be the Right Road!

kannan infratech

September 20th, 2012, 12:00 PM

Why India has to follow this failed US Model ?

http://1-million-dollar-blog.com/physical-gold-investment-paramount-all-forms-of-investment-for-a-stable-global-economy/

Physical Gold Investment Paramount all Forms of Investment for a Stable Global Economy
2ND AUGUST, 2012

The US economy is currently tussling with financial crisis after the Great Depression. Similarly to the previous 1929 worldwide economic downturn, marked with immense bank failures and stock market collapse, the country is once again encircles with unforeseen bankruptcy of huge trusted banks and extreme market volatility.

There are many prime causes that lead to the current US financial crisis and gradually affecting the global economy. During a recent media round table discussion at Public Gold, Mr Pang Bo Fu, the President of International Consumer Federation for Businessmen in China, who foresees US to encounter a drastic economy downturn very soon.

“US economy is expected to be affected severely as US has been printing paper money far too long since 1971 without proper planning. This in return causes the depreciation of the country’s currency. Moreover, they also invested too much money in the form of bonds, stock market, and property, which will become worthless and bring down the country’s economy. Under these circumstances, only raw products primarily physical gold is the most secure form of investment and could retain its value regardless of inflation or economy slump”.

China is among one of the primary countries that invested two third of its reserve in US Dollars, mostly US treasury bonds and agency bonds. Based on English.xiahuanet.com, the current total of China’s Treasury Holdings in US Treasuries is approximately $1.2 trillion. If China were to continue investing its reserve in US treasury bonds and agency bonds, they will continue losing money. And the best solution to counter this issue is to substitute investment in bonds with physical gold.

Countries affiliated with the US treasury bonds including Malaysia are expected to land in the same scenario as what US is likely to face, which is the collapse of economy. Nevertheless, an investment in physical gold would be the most suitable form of investment to overcome the crisis.

Mr Pang Bo Fu added, “In comparison with physical gold, other resources such as petroleum, property, bonds have lower value. Everyone should start buying physical gold because it provides the best hedge against inflation or any economy downturn. Therefore, investment in physical gold is the best solution should there be any economy mishap occurs in the country. To invest in physical gold, the public can always turn to Public Gold as it provides the perfect platform for investors to invest in gold and silver”.

As what Public Gold Executive Chairman, Dato’ Louis Ng said, “Gold is the king of all. It provides the best preservation of anyone’s wealth for the betterment of the nation and its citizens”.

Adapted from

http://www.stock-market-investors.com/stock-investment-risk/what-caused-the-current-financial-crisis.html

http://news.xinhuanet.com/english/china/2012-05/23/c_131605050.htm

kannan infratech

September 20th, 2012, 12:07 PM

We should rather follow China than US in Physical Gold Stocks.

Chinese invested in US Treasury Bonds (due to huge exports to USA) and now are likely to lose big. They are converting the bonds into Physical Gold.

http://www.zerohedge.com/news/wikileaks-discloses-reasons-behind-chinas-shadow-gold-buying-spree

Wikileaks Discloses The Reason(s) Behind China's Shadow Gold Buying Spree
Wondering why gold at $1850 is cheap, or why gold at double that price will also be cheap, or frankly at any price? Because, as the following leaked cable explains, gold is, to China at least, nothing but the opportunity cost of destroying the dollar's reserve status. Putting that into dollar terms is, therefore, impractical at best, and illogical at worst. We have a suspicion that the following cable from the US embassy in China is about to go not viral but very much global, and prompt all those mutual fund managers who are on the golden sidelines to dip a toe in the 24 karat pool. The only thing that matters from China's perspective is that "suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's role as the international reserve currency. China's increased gold reserves will thus act as a model and lead other countries towards reserving more gold.Large gold reserves are also beneficial in promoting the internationalization of the RMB." Now, what would happen if mutual and pension funds finally comprehend they are massively underinvested in the one asset which China is without a trace of doubt massively accumulating behind the scenes is nothing short of a worldwide scramble, not so much for paper, but every last ounce of physical gold...

From Wikileaks:

3. CHINA'S GOLD RESERVES

"China increases its gold reserves in order to kill two birds with one stone"

"The China Radio International sponsored newspaper World News Journal (Shijie Xinwenbao)(04/28): "According to China's National Foreign Exchanges Administration China 's gold reserves have recently increased. Currently, the majority of its gold reserves have been located in the U.S. and European countries. The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold's function as an international reserve currency. They don't want to see other countries turning to gold reserves instead of the U.S. dollar or Euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's role as the international reserve currency. China's increased gold reserves will thus act as a model and lead other countries towards reserving more gold.Large gold reserves are also beneficial in promoting the internationalization of the RMB."
Perhaps now is a good time to remind readers what will happen if and when America's always behind the curve mutual and pension fund managers finally comprehend that they are massively underinvested in the one best performing asset class.

From The Driver for Gold You’re Not Watching (via Casey Research)

You already know the basic reasons for owning gold – currency protection, inflation hedge, store of value, calamity insurance – many of which are becoming clichés even in mainstream articles. Throw in the supply and demand imbalance, and you’ve got the basic arguments for why one should hold gold for the foreseeable future.

All of these factors remain very bullish, in spite of gold’s 450% rise over the past 10 years. No, it’s not too late to buy, especially if you don’t own a meaningful amount; and yes, I’m convinced the price is headed much higher, regardless of the corrections we’ll inevitably see. Each of the aforementioned catalysts will force gold’s price higher and higher in the years ahead, especially the currency issues.

But there’s another driver of the price that escapes many gold watchers and certainly the mainstream media. And I’m convinced that once this sleeping giant wakes, it could ignite the gold market like nothing we’ve ever seen.

The fund management industry handles the bulk of the world’s wealth. These institutions include insurance companies, hedge funds, mutual funds, sovereign wealth funds, etc. But the elephant in the room is pension funds. These are institutions that provide retirement income, both public and private.

Global pension assets are estimated to be – drum roll, please – $31.1 trillion. No, that is not a misprint. It is more than twice the size of last year’s GDP in the U.S. ($14.7 trillion).

We know a few hedge fund managers have invested in gold, like John Paulson, David Einhorn, Jean-Marie Eveillard. There are close to twenty mutual funds devoted to gold and precious metals. Lots of gold and silver bugs have been buying.

So, what about pension funds?

According to estimates by Shayne McGuire in his new book, Hard Money; Taking Gold to a Higher Investment Level, the typical pension fund holds about 0.15% of its assets in gold. He estimates another 0.15% is devoted to gold mining stocks, giving us a total of 0.30% – that is, less than one third of one percent of assets committed to the gold sector.

Shayne is head of global research at the Teacher Retirement System of Texas. He bases his estimate on the fact that commodities represent about 3% of the total assets in the average pension fund. And of that 3%, about 5% is devoted to gold. It is, by any account, a negligible portion of a fund’s asset allocation.

Now here’s the fun part. Let’s say fund managers as a group realize that bonds, equities, and real estate have become poor or risky investments and so decide to increase their allocation to the gold market. If they doubled their exposure to gold and gold stocks – which would still represent only 0.6% of their total assets – it would amount to $93.3 billion in new purchases.

How much is that? The assets of GLD total $55.2 billion, so this amount of money is 1.7 times bigger than the largest gold ETF. SLV, the largest silver ETF, has net assets of $9.3 billion, a mere one-tenth of that extra allocation.

The market cap of the entire sector of gold stocks (producers only) is about $234 billion. The gold industry would see a 40% increase in new money to the sector. Its market cap would double if pension institutions allocated just 1.2% of their assets to it.

But what if currency issues spiral out of control? What if bonds wither and die? What if real estate takes ten years to recover? What if inflation becomes a rabid dog like it has every other time in history when governments have diluted their currency to this degree? If these funds allocate just 5% of their assets to gold – which would amount to $1.5 trillion – it would overwhelm the system and rocket prices skyward.

And let’s not forget that this is only one class of institution. Insurance companies have about $18.7 trillion in assets. Hedge funds manage approximately $1.7 trillion. Sovereign wealth funds control $3.8 trillion. Then there are mutual funds, ETFs, private equity funds, and private wealth funds. Throw in millions of retail investors like you and me and Joe Sixpack and Jiao Sixpack, and we’re looking in the rear view mirror at $100 trillion.

I don’t know if pension funds will devote that much money to this sector or not. What I do know is that sovereign debt risks are far from over, the U.S. dollar and other currencies will lose considerably more value against gold, interest rates will most certainly rise in the years ahead, and inflation is just getting started. These forces are in place and building, and if there’s a paradigm shift in how these managers view gold, look out!

I thought of titling this piece, “Why $5,000 Gold May Be Too Low.” Because once fund managers enter the gold market in mass, this tiny sector will light on fire with blazing speed.

My advice is to not just hope you can jump in once these drivers hit the gas, but to claim your seat during the relative calm of this month's level prices.

h/t Simon via TF Metals Report

kannan infratech

September 20th, 2012, 12:09 PM

If Bankers themselves cheats the investors, where can we go ?

RPT-Ex-UBS bankers cheated cities by rigging bond bids -U.S.

http://article.wn.com/view/2012/07/30/RPTExUBS_bankers_cheated_cities_by_rigging_bond_bids_US/

kannan infratech

September 20th, 2012, 12:10 PM

The Reasons for Investing in Physical Gold

http://www.resourceinvestor.com/2012/05/09/the-reasons-for-investing-in-physical-gold

I believe most investors and savers should hold up to 10% of their investible assets and personal savings in physical gold and for some high-net-worth investors a greater percentage allocation to gold may be appropriate.

Physical gold serves at least four important investment objectives:

First, it provides a form of financial insurance should unforeseen economic or political events diminish the value or liquidity of your ordinary equity, fixed income, or real estate assets. This alone is sufficient reason to allocate up to 10% of one's investments and savings to physical gold. And, just like life insurance, your home-owners insurance, your health insurance and your auto insurance, you're happiest never collecting.

Second, gold is the preeminent inflation hedge, offering protection against excessive monetary creation, future inflation at home and U.S. dollar devaluation in world currency markets.

Third, it is a unique portfolio diversifier. Even though the price of gold may be, at times, quite volatile, because its price movements tend to be uncorrelated with the ups and downs in other asset prices, it reduces the volatility and price risk in one's overall investment portfolio. In other words, a portfolio including gold is over time less volatile than the same portfolio excluding gold.

Fourth, gold's supply/demand fundamentals – especially expected growth in both jewelry and investment demand from China and India as well as increasing central-bank reserve accumulation – suggest its price will move sharply higher in the next three-to-five years – and is likely to continue outperforming most other investments, much as it has over the past decade.

Many investors confuse gold with gold-mining equities, gold exchange-traded funds (ETFs) and other "paper" gold investment products. But when I recommend holding up to 10% of one's overall investments and savings in gold, I'm talking about physical gold – bullion bars and bullion coins – that you can actually hold and store on your own or with a safe-deposit facility of your own choosing.

And, I'm talking about long-term holdings of physical gold – holding that you might sell as a last resort. If you wish to actively trade gold, speculate in short-term price movements, or bet on gold-mining shares, go right ahead – but understand that these positions should be in addition to – not instead of – your "core" percentage.

One of the main reasons to own physical gold is risk reduction – to reduce or avoid the risks that threaten ordinary investments and savings including equities, bonds, mutual funds, gold ETFs and foreign currencies.

Gold-mining equities, unlike physical gold, do not lower risk but actually subject the investor to a myriad of risks not associated with ownership of the physical metal. These include:

Management risk – the risk that company executives and directors will make poor decisions and mismanage the companies business. This includes diversification away from gold to other mineral mining or

Stock-market risk – the risk that a swift decline in equity prices (such as the "Flash Crash" of May 2010) will drag gold-mining shares lower along with everything else.

Exchange risk – the risk that stock exchanges close or trading is suspended due to terrorism, natural catastrophe, computer hacking, or government mandate.

Political or country risk – the risk of nationalization of mining assets (as occurred in recent years in Venezuela and is now threatened in South Africa, Mongolia and some South American countries) or the imposition of hostile government regulations, including environmental regulations, that increase costs and slow development of new and existing mines.

Tax risk – the risk that mines may be subject to excessive or punitive taxation as illustrated by the recent Obama budget proposals calling for a five-percent royalty on revenues from all domestic US mining activities.

Cost inflation – although gold is an inflation hedge, mining companies are subject to rising costs for energy, labor, steel, chemicals and other inputs.
Historically, some investors have preferred gold-mining equities to the real thing, simply because they offered leveraged exposure to the gold price. When gold prices went up, gold-share prices generally went up more.

http://www.munknee.com/2012/06/the-case-against-physical-gold-and-for-gold-etfs/

kannan infratech

September 20th, 2012, 12:22 PM

Don’t chase ETFs trading below net asset value

http://business.financialpost.com/2012/03/30/dont-chase-etfs-trading-below-net-asset-value/

There’s no doubt exchange traded funds, or ETFs, have become a huge hit with investors. More than 90 ETF products debuted in Canada in the first 11 months of 2011, according to data from Morningstar Research Inc. At the same time, the number of ETF providers in this country doubled. As of February of this year, there were 222 ETFs in Canada with roughly $45.3-billion in assets under management.

As the number of ETFs on offer multiplies, so do the ways investors try to find any edge in an attempt to beat the market. But investors trying to stock up on cheap or undervalued ETFs are probably going to find themselves out of luck. As anyone who has started to follow ETFs can appreciate, the price of an individual ETF can sometimes trade at a discount or premium to the fund’s net asset value (NAV) — essentially the value of the fund as determined by its net underlying holdings.

Unfortunately, such discounts and premiums don’t stick around for long — a few mere hours or a trading day if you’re lucky. “Theoretically, yes, you could buy discounts, but it’s very difficult to capitalize upon,” said Jaime Purvis, executive vice-president at Horizons Exchange Traded Funds Inc. “As a regular investor, if you think you can capitalize on them, I promise the electronic, institutional investors will jump in before you have a chance.”

But a lack of available discounts is actually one of the benefits of ETFs. After all, the mechanisms in place that prevent big premiums or discounts actually work in favour of investors because they prevent bubbles or price crashes from occurring. Here’s why:

The price of an ETF is determined by its underlying holdings, and there is a force that keeps the price in-line with its holdings called the authorized purchaser, also commonly known as the market maker. These entities are usually broker-dealer firms — for example, all six of Canada’s biggest banks offer this service — that provide liquidity in markets.

The market maker’s job is two-fold. One is to track the price moves of the ETF’s underlying holdings — whether that’s stocks or commodities — and ensure the price of the ETF doesn’t deviate from that underlying value. Market makers are also contractually obligated in fair markets to maintain a bid-ask spread that stays within the range of the ETF’s NAV — ensuring there are few periods when a discount or premium develops.

“The market maker’s job is to ensure that supply meets demand — if they have too many units on their shelf, they redeem them with the ETF issuer,” Mr. Purvis said. “When they sense demand is going up, they create more units with the ETF company and sell them to the market. The ETF trades like a stock, but it’s open ended like a mutual fund.”

A regular stock, by contrast, has a set number of shares that are issued by the company and prices freely rise and fall as larger numbers of investors either buy or sell.

Of course, there are cases where ETF discounts or premiums do develop for slightly longer periods of time, usually when the underlying holdings are less liquid.

Mr. Purvis points out that ETF bid-ask spreads are very tight for ultra-liquid holdings such as the Horizons BetaPro NYMEX Natural Gas Bull+ & Bear+ ETF (HUN/TSX). Millions of natural gas contracts are traded every day, allowing the market maker to add or sell the underlying holdings quickly when needed, which corrects any price difference between the ETF and its NAV.

But if an ETF holds foreign companies on stock exchanges with lower levels of liquidity, the market maker may not have the ability to adapt so quickly. In this case, if demand for an ETF goes up, the market maker may have to wait longer to buy or sell the underlying holdings. Factors such as time differences also come into play if an ETF with foreign holdings trades on a North American exchange.

For the most part, however, Mr. Purvis says investors hoping to chase ETFs that have discounts probably won’t experience very fruitful results.

“It’s not a good approach for the average investor,” he said.

kannan infratech

September 20th, 2012, 12:30 PM

The Truth Behind Govts supporting Gold ETFs

http://truthingold.blogspot.in/

Gists:

The Income And Substitution Effect
The gold/silver story is starting to seep into the masses. It will happen slowly, but if just 5% of the masses start to buy real gold and silver and eschew the fraudulent ETFs, there will be a serious price explosion. Imagine what will happen if 15-20% of the public start buying...it will be interesting to watch the gold/silver ratio, because as both metals get more expensive, there will be a serious display of the economic law of "income and substitution effect," and we'll see the "silver is poor man's gold" axiom on display in a major way.

Friday Comedy - Obama Show
I buy every month, and I will never, ever sell it as long as people such as Mitt Romney, Paul Ryan, Obama, Biden, Bernanke, and Geithner are in government. I will never sell it. Never. - Marc Faber, Swiss Investor, King World News

Public Employees: They Are Different From You and Me...
(Note: for those unaware, my title is a play on F. Scott Fitzgerald's quote: "Let me tell you about the very rich. They are different from you and me.")
We live in a self-entitled society and no sector is more self-entitled than those who work for the Government, supported by taxpayers with guaranteed salaries and pensions. Their sense of self-entitlement is worse than that of the lumbering herd of overweight middle class houseswives who drive around in their gas-guzzling, over-sized SUVs, running up credit card debt and chatting on their cellphone the second they get into their car...

MF Global On Steroids
There is no way over, under, around or through the fact that no progress will be made as long as the world is divided up between the rulers and the ruled and the ruled accept their lot...There has never been any shortage of those who want to rule. The problem has always been with the vast majority who are content to be ruled. Today’s global outcry for the manufacturing of more and more “money” out of thin air is an eloquent testimony. It shows that most people have no understanding of freedom, markets or money. Lacking such understanding - and having no desire to gain it - most people have accepted government as their masters.

FOMC: This Is The Beginning Of "The Big Print" - Unlimited QE
The fact that enough people still listen to Cramer is the perfect indicator of just how stupid part of our population is and it explains how we - the people - let our country lapse into systemic collapse. At it's base level, Government intervention in our lives prevents the Darwinian mechanism of natural selection from doing what it's supposed to do. That Cramer still sells his crap and that CNBC is still on the air is a perfect testament to that.

The New York Fed said it will start buying agency mortgage-backed securities on Friday, at a rate that is expected to total $23 billion over the remainder of September. It will then purchase securities at a clip of $40 billion each month. The New York Fed said it will concentrate its purchases in newly-issued agency MBS in the to-be-announced market, although it may purchase other agency MBS if market conditions warrant (LINK

Gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium...I see a great future for gold and silver coins as the currency people may increasingly turn to when paper currencies begin to disintegrate.

What Now?
While the prospects for hyperinflation and the general outlook on the economic and systemic-solvency crises are unchanged, general circumstances have continued to advance towards the ultimate demise of the dollar. The most recent development was yesterday’s (Septembers 13th) announcement by the Federal Open Market Committee (FOMC) of a new, open-ended round of Federal Reserve quantitative easing (QE3)

A Paradigm Shift
We suspect last week’s events, in which both the ECB and Fed committed to open-ended base money creation – against a geopolitical environment in which China’s USD reserves are being held astride an increasingly dynamic domestic political regime and in which the petro-dollar regime of the past forty years seems under attack – may be the catalyst that begins to raise public awareness of the link between monetary inflation and price inflation.

kannan infratech

September 20th, 2012, 12:42 PM

What Mutual Funds gain from your Gold ETFs ?

You pay 1.25% to 2.5% on the total (Buying Price or Sale value - Not clear) every year to the MFCs, irrespective price going up or going down. This is apart from the margins they make on your investments.

In effect this is equivalent to Seikooli Sedharam discounts what the Jewelers do now. Englipeesla explain panni adhe kollai.

Your assets get discounted / depreciated value every year at approx 1.25% to 2.5% per annum.

Nammala invest panna vechu eppadi ellam kollai adikkaranga.

http://www.goldetf-funds.com/expense-ratio-of-gold-etfs

Expense Ratio of Gold ETFs

Expense Ratio is an important factor while choosing a gold ETF, of course for any mutual fund especially for an index fund. The lower the expense ratio, the better for investors. As far as the display of expense ratios is concerned only a few AMCs are transparent. To show a lower number, some AMCs display only Investment management charges rather than the total expenses that they charge to the scheme. This is misleading. Total expense ratio comprises of many components as given below.

Investment Management & Advisory Fee
Custodial Fees
Registrar & Transfer Agent Fees which includes cost related to providing accounts statement, dividend/redemption cheques/warrants etc.
Marketing & Selling Expenses including Agents Commission and statutory advertisement
Brokerage & Transaction Cost pertaining to the distribution of units -
Audit Fees/ Fees and expenses of trustees
Cost related to investor communications -
Cost of fund transfer from location to location -
Other Expenses
I have done a research on this and found out the figures shown below. I hope it would be useful for the readers. The lower expense ETF comes first in the list.

Gold ETF Fund Total Recurring Expense Ratio
Quantum Gold ETF 1.25%
Birla Sun Life Gold ETF 1.5%
Gold BeES 2.25%
UTI Gold ETF 2.5%
Kotak Gold ETF 2.5%
Reliance Gold ETF 2.5%
SBI Gold ETF 2.5%
Religare Gold ETF 2.5%
HDFC Gold ETF 2.5%
ICICI Gold ETF 2.5%
Axis Gold ETF 2.5%
So if you come across any gold ETF with less expense ratio than above figure, it is only “Investment Management fees”.For more clarity, here I am giving the breakup of total recurring expenses of Quantum Gold ETF.

Expense Head Expense (in % of weekly average of net assets)
Investment Management & Advisory Fee 0.5
Custodial Fees 0.45
Registrar & Transfer Agent Fees 0.04
Marketing and Selling 0.05
Brokerage and Transaction cost 0
Audit Fees/ Fees and expenses of trustees 0.09
Cost of investor communication 0
Cost of fund transfer 0
Other Expenses 0.12
Total Expenses 1.25
Be Sociable, Share!

kannan infratech

September 20th, 2012, 12:50 PM

A Blogspot giving lots of historical Information on Gold in India

http://fofoa.blogspot.in/2012/02/indias-gold.html

kannan infratech

September 20th, 2012, 01:00 PM

Can we buy Physical Gold and keep in Bank Vaults for safe keeping ? BIG NO !!!

http://911research.wtc7.net/wtc/evidence/gold.html

Missing Gold

Precious Metals in WTC 4 Vault: Only a Fraction Recovered?

This image is found on the PBS.org website companion for the television documentary America Rebuilds under the section Uncovering Property. The page, entitled A Treasure in Silver and Gold, describes the vault as two levels of 3,000 square feet each. See the source for the full-sized image. The page credits images to Leslie E. Robertson and Associates.
The basement of 4 World Trade Center housed vaults used to store gold and silver bullion. Published articles about precious metals recovered from the World Trade Center ruins in the aftermath of the attack mention less than $300 million worth of gold. All such reports appear to refer to a removal operation conducted in late October of 2001. On Nov. 1, Mayor Rudolph Giuliani announced that "more than $230 million" worth of gold and silver bars that had been stored in a bomb-proof vault had been recovered. A New York Times article contained:

Two Brinks trucks were at ground zero on Wednesday to start hauling away the $200 million in gold and silver that the Bank of Nova Scotia had stored in a vault under the trade center ... A team of 30 firefighters and police officers are helping to move the metals, a task that can be measured practically down to the flake but that has been rounded off at 379,036 ounces of gold and 29,942,619 ounces of silver .. 1
Reports describing the contents of the vaults before the attack suggest that nearly $1 billion in precious metals was stored in the vaults. A figure of $650 million in a National Real Estate Investor article published after the attack is apparently based on pre-attack reports.

Unknown to most people at the time, $650 million in gold and silver was being kept in a special vault four floors beneath Four World Trade Center. 2
An article in the TimesOnline gives the following rundown of precious metals that were being stored in the WTC vault belonging to Comex. 3

Comex metals trading - 3,800 gold bars weighing 12 tonnes and worth more than $100 million
Comex clients - 800,000 ounces of gold with a value of about $220 million
Comex clients - 102 million ounces of silver, worth $430 million
Bank of Nova Scotia - $200 million of gold
The TimesOnline article is not clear as to whether the $200 million in gold reported by the Bank of Nova Scotia was part of the $220 million in gold held by Comex for clients. If so, the total is $750 million; otherwise $950 million.

There appear to be no reports of precious metals discovered between November of 2001 and the completion of excavation several months later. Assuming that the above reports described the value of precious metals in the vaulst before the attack, and that the $230 million mentioned by Giuliani represented the approxmiate value of metals recovered, it would seem that at least the better part of a billion dollars worth of precious metals went missing. (It is not plausible, of course, that whatever destroyed the towers vaporized gold and silver, which are dense, inert metals that are extremely unlikely to participate in chemical reactions with other materials.)

An article in The Sierra Times suggests that gold was recovered from two trucks in a tunnel under 5 World Trade Center, giving rise to suspicions that the trucks were being used to remove the gold from the vaults before the South Tower fell. 4 However, this report may have been based on an erroneous reading of other reports that describe the removal of crushed vehicles from a tunnel under 5 WTC in order to gain access to the vaults under 4 WTC to remove their contents. 5

Why is there this huge discrepancy between the value of gold and silver reported recovered, and the value reported to have been stored in the vaults? There are a number of possible explanations, from outright theft using the attack as cover, to insurance fraud. Until there is a genuine investigation that probes all the relevant facts and circumstances surrounding the attack, we can only speculate.

References
http://www.nytimes.com/2001/11/01/nyregion/a-nation-challenged-the-vault-below-ground-zero-silver-and-gold.html

http://www.thetimes.co.uk/tto/news/

Who Benefits from the World Trade Center/Pentagon Attacks?

http://www.goodnewsaboutgod.com/studies/wtcbombings.htm

kongutamizhan

September 20th, 2012, 02:14 PM

India isn't producing enough, but consume a lot. Pre FDI scenario :)

m.pluggd.in/india-production-vs-consumption-statistics-297/

kannan infratech

September 20th, 2012, 02:18 PM

India is the Gold Sink of the world.

The micro level Physical Gold stocks will sustain the Indian economy if they are not snatched away by the Govt.

kongutamizhan

September 20th, 2012, 03:22 PM

Ok now an anti-FDI (actually WM) article. From Gurumurthy

'Reform' at nation's cost

By S Gurumurthy

20th September 2012 12:05 AM

Indeed ironical. On the same Friday (September 14) Prime Minister Manmohan Singh rolled out the red carpet for Walmart, New York City, America’s largest, shut Walmart out. Again ironically the very Friday the UPA government handed the FDI bouquet to Walmart and lobbyists assured that small retailers are safe, Atlanticcities, a web-newspaper from the stable of the famous Foreign Affairs magazine, carried a devastating headline news: ‘Radiating Death: How Walmart Displaces Nearby Small Businesses’. Weeks ago, on June 30, over 10,000 people, shouting “Walmart = Poverty”, marched through Los Angeles, America’s richest city, against Walmart stores. On June 1, hundreds protested in Washington DC against Walmart. “Say-No-To-Walmart” is an ongoing movement all over the United States.

Why focus on Walmart? It is world’s most powerful retailer; it has ‘spent’ a lot to get the UPA nod for FDI in retail. <<more here (http://newindianexpress.com/opinion/article666721.ece)>>

kannan infratech

September 20th, 2012, 03:28 PM

@ Gurumoorthy article:

Neraiya Background info therinjadhala it pains me more. The intentions are certainly not good. Even there are moves to give tax concessions specific to them.

For once I will support Commies on this.

logan_square_guy

September 20th, 2012, 08:16 PM

You look at any data at a per capita level, and we are at the bottom of the pile :ohno:

At an aggregate level, we are huge and words like superpower start getting thrown around :lol:

India isn't producing enough, but consume a lot. Pre FDI scenario :)

m.pluggd.in/india-production-vs-consumption-statistics-297/

kongutamizhan

September 20th, 2012, 08:35 PM

^^ aduvachum paravaillai. Bharat banthla naalu bus and train damange pannirupanga andha selavu plus oc'la TV, aadu, maadu kudukura selavu ellam serthu GDP egirirukkum udanae TN sky-rocketing GDP growth'nu solliruvanga.

NOTE: entha paya pulla kolli kannu pattucho konja naala sandai illama poyikittu irukku. oru dirusti vendam? :)

From the article

There is something drastically wrong with our foundations.

idhu thaana unga takku? innum goverment kitte takku kaanom

satchitananda

September 20th, 2012, 08:38 PM

^^ NOTE: entha paya pulla kolli kannu pattucho konja naala sandai illama poyikittu irukku. oru dirusti vendam? :)

Kolli kanna ille Kolli vaaya ?? hehe

comeon... ssstart... muuujik

geico2000

September 20th, 2012, 09:05 PM

^^ aduvachum paravaillai. Bharat banthla naalu bus and train damange pannirupanga andha selavu plus oc'la TV, aadu, maadu kudukura selavu ellam serthu GDP egirirukkum udanae TN sky-rocketing GDP growth'nu solliruvanga.

NOTE: entha paya pulla kolli kannu pattucho konja naala sandai illama poyikittu irukku. oru dirusti vendam? :)

From the article

idhu thaana unga takku? innum goverment kitte takku kaanom

Ippathan CY kitta, sandaiku all illama KT nunthu noodles agitarunu sonnen :)

We have to lure Murali and Jaish to this thread.

krishnaswamy

September 20th, 2012, 09:42 PM

Ippathan CY kitta, sandaiku all illama KT nunthu noodles agitarunu sonnen :)

We have to lure Murali and Jaish to this thread.

NOTE: entha paya pulla kolli kannu pattucho konja naala sandai illama poyikittu irukku. oru dirusti vendam? :)

Yerkanave, SSC TN members list egiruttu irukkuthu.
ithule potta sandaiya, thiruppi podanuma? ada pongappa...ellam waste.."eye vash"..(thillu mullu style)

Koncham Kalaara nadanthu pakkathu ooru theneer viduthi-galukku poi parunga
ungalukke unmai piriyum.

summa solla koodathu...Kannan sir bade killadi ppa...immam periya kootathai katti meichukinu irukkare..

PS: Enna than TN AA topic-le sandai pottalum, TN Buses & pics topic "view" count beat panna mudiyalabba.always maintains 15000 lead.

geico2000

September 20th, 2012, 09:56 PM

PS: Enna than TN AA topic-le sandai pottalum, TN Buses & pics topic "view" count beat panna mudiyalabba.always maintains 15000 lead.

Ammam sandaiyea podama avalavu postu? nalla pasanga. Ippaidyea pona they may disqualify us from posting in that thread :)

But ellorum senthu AAva pichi china pinama akiteeengalae, athe madri TN Bus threadaium akanom, Ithu natamai therpu...

kongutamizhan

September 20th, 2012, 10:08 PM

^^ Angayum Karnataka / TN bus sandai appappa nadakkum. Naduvula yaaravathu vandhu 10 high-resolution photo continuous'a poduvanga divert aayirum :lol:

By the way no sandai in SSC TN is a major current event contributing to world peace (and is non political). So I guess our discussions are justified in this thread

krishnaswamy

September 20th, 2012, 10:22 PM

^^ Angayum Karnataka / TN bus sandai appappa nadakkum. Naduvula yaaravathu vandhu 10 high-resolution photo continuous'a poduvanga divert aayirum :lol:
aama.neriya nadanthuchu..
Nalla pasanga. Avangalukku, ippo unmai therinchu, sandai stop pannitanga.

ippo only "red" bus photos than.

In olden days, Pongalu-kku munnadi Veetu suvar-le Kaavi Color-le pattai pattai paint adipanga.
Athu mathiri eppo ella bus-kkum kurukkum, nedukkuma Kaavi Pattai adichu vachu irukkanga.

Kaavi pattai parthu parthu, Kannu pottai aagama iruntha seri.
Standardisation panrennu, ennavo kolaru pannikkittu irukkaru senthil balaji.

Amma-BJP: Amma-TNSTC-Kaavi Pattai...etho sync aguthulle. :nuts:

vgraja

September 21st, 2012, 05:48 PM

aaru maasathukku oru thadava paint color ellam maathinaa TN paint companygal ellam polachikkum

kongutamizhan

September 21st, 2012, 06:10 PM

Wal*Mart expects to open its first store in India in 18 months

Source: NDTV (http://profit.ndtv.com/news/corporates/article-wal-mart-expects-first-indian-store-within-18-months-report-311151?pfrom=home-otherstories)

kannan infratech

September 21st, 2012, 06:12 PM

Guys,

Please Keep ranting & trolling in TNAA or CD. Please use this thread for quality discussion on current topics & issues.

Vasu

September 21st, 2012, 11:25 PM

Conversation with the mystic
Dr Jayaprakash Narayan with Sadguru Jaggi Vasudev

Watch this on Youtube Part 1 (http://www.youtube.com/watch?v=7CYCFzcddBE&feature=relmfu) Part 2 (http://www.youtube.com/watch?v=gPZBROIdsPQ&feature=relmfu) Part 3 (http://www.youtube.com/watch?v=NGk5AB_W7-M&feature=relmfu) Part 4 (http://www.youtube.com/watch?v=R2DtV8wDJx8&feature=relmfu)Part 5 (http://www.youtube.com/watch?v=tFheVNKo66A&feature=relmfu) Part 6 (http://www.youtube.com/watch?v=pmuqIjNzvos&feature=relmfu) Part 7 (http://www.youtube.com/watch?v=wYIII9Rss_c&feature=endscreen&NR=1)

murlee

September 22nd, 2012, 08:20 PM

It was a good program.. just 18 mins.

Truth vs Hype: FDI in retail - Political doublespeak

http://www.ndtv.com/video/player/truth-vs-hype/truth-vs-hype-fdi-in-retail-political-doublespeak/247872?pfrom=home-lateststories

kannan infratech

September 23rd, 2012, 01:15 PM

Corporate India vs Government: Full circle

http://www.moneylife.in/article/corporate-india-vs-government-full-circle/26249.html

In some ways, we are back to the pre-reform days. But corporate India thinks it can prosper by quietly adjusting to the grim reality

February 1992: I wrote about a secret meeting of top industrialists threatened by economic reforms, at Mumbai’s Belvedere Club at the Oberoi Hotel, to strategise about how to lobby the government to slow down. It was the infamous Bombay Club, many of whose participants have vanished from the list of top industry groups.

May 2012: India Today reports how Kumar Mangalam Birla, Sunil Bharti Mittal, Vittorio Collao and Jon Fredrik Baksaas were shuttling between various ministries, desperately trying to explain how the telecom regulator’s recommendations would kill the Indian telecom industry.

Are we back to square one, after two decades? In 1992, middle-class India, fed up of government monopolies, waiting lists, shortages and hair-brained policies that bankrupted India, was hugely supportive of reforms. Even the Harshad Mehta and Enron scandals didn’t touch Dr Manmohan Singh’s personal reputation or raise questions about his ability. In 2012, middle-class India is again exasperated—this time, about the loot of national resources by politicians and industrialists supported by feckless bureaucrats. But the biggest damage is to Dr Singh’s credibility. He is seen as the man who stood by silently and allowed the perversion of institutions and regulatory mechanism.

Public anger is not restricted to business but also extends to media (vanishing ethics), exploitative educationists, rapacious doctors (in cahoots with hospitals and pharma companies) and a broken justice system (the entire gamut of lawyers, courts, regulators, policemen and investigation agencies). When public anger spilled into the streets and manifested in demonstrations, the government was forced to act.

A string of scandals—from Adarsh Housing Society, 2G (telecom), Commonwealth Games, Bellary Mines and the investigation in Karnataka and Andhra Pradesh (Yedurappa’s and Jagan Reddy’s machinations) have signalled that even ministers, members of parliament (MPs), senior bureaucrats, corporate executives and politically-connected industrialists will not be spared from arrest and jail when the tide of public opinion forces government agencies to act. Over the past two years, it has become clear that a government desperate to ensure its own survival will sacrifice friends and financiers.

Is corporate India learning any lessons? Well, some of the wiser industrialists do worry about civic strife but others, like Vijay Mallya, are blithely unconcerned at the outrage over their debt defaults, inability to pay taxes, salaries and rents. Those like the Ruias of Essar are busy ring-fencing themselves from the consequences of their dubious dealings. Four months ago, a steel sector source told us how family-owned business houses are working at protecting themselves from the new environment. He said they wanted to put professionals in charge of management and were even planning to vacate board directorships. “You mean corporate India will make way for professional management?” I asked, anticipating a defining moment in India’s corporate history. My source hastened to correct me. There was no question of letting go of control, he said. A two-level committee structure would ensure that owners remained the power centre but professionals would sign-off and implement decisions.

“Why would professionals put themselves in the line of fire?” I asked. After all, it is widely perceived that Gautam Doshi and others were the fall guys who were arrested and spent months in jail taking the rap for the Anil Ambani group’s decisions. This happened soon after Anil Ambani managed to persuade the Securities & Exchange Board of India (SEBI) to bury a major scandal about unauthorised trades ($3.2 billion worth) in third-party Swiss bank accounts by paying a paltry penalty of $10 million in a consent deal. The deal also ensured that the Reserve Bank of India (RBI), enforcement directorate and tax authorities did not investigate the matter, despite a detailed complaint by Froriep Renggli, a Zurich-based law firm.

In early June, the Essar group announced the precise game plan outlined by my steel-industry source. It was clearly a fallout of the arrest-threat faced by Ravi Ruia and Prashant Ruia over the Loop Telecom deal in the 2G scam. So, these first-generation entrepreneurs, with one of the worst track-records regarding minority shareholders and multiple defaults in payments to lending institutions, are being lauded by a pink paper for being the family-controlled corporate group to ‘separate ownership from management’. Will it work? We will only know when the two-committee structure that meets listing requirements, as well as insider trading and governance rules is in place and top professionals accept a position that gives them regulatory accountability and fat salaries but no real power.

The Sahara group is another example of how the powerful patronage of politicians has reduced almost every regulator to helpless impotence when it comes to its opaque financials, complex corporate structure, lack of accountability and non-transparent businesses. The RBI steadfastly refuses to answer questions related to the Sahara group. Only SEBI demanded compliance from the group’s two companies that issued debenture-like instruments without regulatory clearance. Sahara has dragged SEBI to the Supreme Court, where India’s most respected legal luminary represents it.

The group flaunts an endless supply of cash while wrapping its lack of financial transparency into a strange corporate philosophy called ‘corporate materialism’ which proclaims that “in the last 33 years not even a single rupee of dividend has been declared by the group and not even a single rupee has been shared from the profit by anybody.” Will anyone explain how the RBI or the ministry of corporate affairs have allowed a group with this weird financial claim to collect over Rs70,000 crore of public money (according to its own newspaper advertisements)? Or how the group has the funds to sponsor the Indian cricket team for so many years? Sahara claims to have spent an astounding Rs1,085 crore on sports and social activities until the end of June 2010.

Then there is Reliance—both halves of the now divided group. The Mukesh Ambani-led business empire goes to court demanding that SEBI must settle a massive insider trading charge through its consent order route, which has been put on ice ever since a public interest litigation questioned its legal validity. Reliance is upset at SEBI’s two-time rejection of its request to file consent proceedings, allegedly because it was willing to pay a paltry amount under the settlement terms. Reliance’s flagging credibility is apparent from its drooping share price which was hit by the many exaggerated claims about the gas-find in its Krishna-Godavari basin wells. The Ambani couple, and their billion-dollar residence, are regularly featured on society pages; yet, come Sunday morning and Nita Ambani beams beatifically from television screens proclaiming that Reliance Foundation is “taking India from darkness to light, from ignorance to knowledge, and from dependence to self reliance.”

The problem of wealth concentration by influencing policy-making is not peculiar to India. Nobel Laureate, Joseph Stiglitz, in a recent article, writes about the dangerous consequences of growing inequality in the US during the same period. He quotes the billionaire investment guru Warren Buffet saying, “There’s been class warfare going on for the last 20 years and my class has won.”

Dr Stiglitz argues that the trickle-down effect does not work when wealth is concentrated among fewer people. “The evidence from history and from around the modern world is unequivocal: there comes a point when inequality spirals into economic dysfunction for the whole society, and when it does, even the rich pay a steep price,” he warns. A poorer country like India will pay that price much sooner than the developed nations. Don’t our industrialists and policy-makers foresee the consequences of their actions?

Sucheta Dalal is the managing editor of Moneylife.

kannan infratech

September 23rd, 2012, 01:19 PM

MF houses receive 3.94 lakh investor complaints in 2009-10, non-receipt of dividends tops the chart

http://www.moneylife.in/article/mf-houses-receive-394-lakh-investor-complaints-in-2009-10-non-receipt-of-dividends-tops-the-chart/7790.html?dhiti=1&p=

Non-receipt of dividends and redemption proceeds remains the biggest worry for mutual fund investors
Non-receipt of dividends and redemption proceeds remains the biggest worry for mutual fund investors. For instance, if an individual has invested in four different schemes and has provided an incorrect address or pin code, the dividend warrant may not reach his/her correct address.

In a bid to improve the grievance redressal mechanism, market watchdog Securities and Exchange Board of India (SEBI) had mandated fund houses to display investor complaints on their respective websites as well as the website of the Association of Mutual Funds in India (AMFI). According to data put up so far on the AMFI website, the 37 fund houses have received 61,604 'non-receipt of dividend' complaints in the financial year 2009-10. There were 51,509 complaints pertaining to non-receipt of redemption proceeds. Issues relating to non-updation of PAN, bank details, nomination, etc attracted 42,515 complaints from investors.

Industry experts point out that it is negligence on the part of the investor while filling up forms as the primary reason behind such complaints. Often, the agent or distributor also fills in the forms on behalf of investors, who may end up furnishing erroneous details.

The mutual fund industry has approximately four crore investor accounts. Many of them are multiple accounts held by single investors. According to the aggregated data available with AMFI, the 37 fund houses received almost four lakh investor complaints during the financial year (FY) 2009-10. If we compare that to the number of folios, the four lakh complaints amount to just 1% of the folios.

"Only bigger dividend amounts are sent by registered post and smaller amounts are sent by ordinary post. If the small dividend warrants are lost, then investors have to obtain a 'reconciled statement' from banks because dividend warrants are usually issued through a cheque payable at par. The 'non-payment certificate' comes easily when a single cheque is issued in favour of a single person at a single bank. But, for 'at par payable' cheques, it takes an average of six months to get a 'reconciled statement'. So even if one complains to MFs, the transaction cannot be retraced easily," Debasish Mohanty, head-marketing, UTI AMC, told Moneylife.

"Recently, there have been cases where wrong people have claimed dividends on behalf of genuine investors. Therefore, to tighten that loophole, fund houses have applied further restrictions. For instance, if one requests change of address, we will ask the investor to provide proof of old address, new address, etc," added Mr Mohanty.

Industry experts say that the introduction of electronic clearing system (ECS) and core banking facility has helped in smoother distribution of dividends.

Redemption cheques are normally sent by registered post, where the amount involved is higher, unlike dividend cheques. Experts point out that investors do not provide details properly while filling up forms. Many application forms received by the registrar & transfer agents (RTAs) and fund houses are incomprehensible, which results in incorrect data entry. Most cases occur during the time of new fund offers (NFOs) wherein a distributor has to submit many forms.

kannan infratech

September 23rd, 2012, 01:26 PM

ICICI Pru Life slapped with highest-ever penalty of Rs1.18 crore

http://www.moneylife.in/article/icici-pru-life-slapped-with-highest-ever-penalty-of-rs118-crore/26047.html?dhiti=1&p=

IRDA has imposed a record penalty of Rs1.18 crore on ICICI Pru Life for several serious violations including an unbelievable 11346% deviation in commission payable to India Infoline Insurance services in 2010-11

The Insurance Regulatory and Development Authority (IRDA) has imposed a record fine of Rs1.18 crore on ICICI Prudential Life Insurance (ICICI Pru Life), the country’s largest private sector insurer. IRDA, which had conducted onsite inspection of the insurer between November and December 2010 found violations regarding corporate agency guidelines, paying more than the stipulated commission to its distributors (corporate agents, referral agents), not regulating corporate agents and making huge payments to brokers.

The regulator has termed “exceedingly serious violation” with stiff penalty of Rs40 lakh for huge deviation in commission to corporate agents like India Infoline Insurance Services, Nandi Financial Services, Netambit ValueFirst services, Soft Insurance Services, Fullerton India Credit, Yule Investments, Alacrity Financials and Sharekhan Financial Services. What is astonishing is a colossal deviation of 11346% and 1559% in commissions to India Infoline Insurance Services during the year 2010-11 and 2009-10 respectively.

ICICI Pru Life had created multiple code numbers for a single corporate agent and brokers based on the location of the business procured. The insurer had not put in place any mechanism to verify that the solicitation of business was done by a specified person or a qualified person respectively in relation to the number of locations or branches. The total penalty for these violations with respect to corporate agents like Bonanza Finproducts Distributors, Fullerton India Credit, Muthoot Wealth Management Services, Pioneer Assurance Consultants is Rs11 lakh.

ICICI Pru Life was remunerating the referral partners in the name of infrastructure support. The insurer was paying exclusive infrastructure fee (upfront) and costs towards space for insurance specialists, insurance corner space, advertising, etc. There have been violations in 20 instances and hence a penalty of Rs40 lakh.

Penalty of Rs20 lakh was imposed for huge deviation in commission to insurance brokers like Anand Rathi Insurance brokers, Bajaj Capital Insurance broking, Standard Composite Insurance brokers, Artha Insurance broking, KM Dastur Reinsurance broker and Edelweiss Insurance brokers. The highest deviation was for Standard Composite Insurance brokers of 402% in 2009-10. It was followed by Bajaj Capital Insurance broking with 152% deviation in commissions for the same year.

The insurer has entered into various agreements/MOUs with its group companies like ICICI Bank, ICICI Housing Finance Co, ICICI Securities, etc. for utilizing their network for marketing, advertisement and other services. These agreements are incomplete as they do not contain the detailed scope of services and the basis of payments for the said services. All these companies are also acting as “Corporate Agents/Referral partners” of the Insurer and are receiving due commission/referral fee. By this action, the insurer has violated clause 21 of Corporate Agency Guidelines. The insurer’s submission that these expenses are for various services like banking services, web promotional space, office space for employees of the insurer, other joint sales campaigns, etc, do not relate to garnering or procuring business, is not tenable and are in violation of the Insurance Act and Regulations cited. Heavy payments are paid towards marketing or logistic support and non-competing fee which are specifically against the provisions of the Act.

kannan infratech

September 23rd, 2012, 01:29 PM

FII INVESTMENT : Genuine Money or Election Funds?

http://www.moneylife.in/article/fii-investment-genuine-money-or-election-funds/28592.html

With the coming in of the new finance minister, markets have reacted positively. But, analysts are sceptical this time and not sure about what to trust

Indian stock indices have been climbing steadily after a new finance minister came in. Foreign money is gushing into India, apparently unperturbed by screaming media headlines about bigger and more dastardly scams erupting everyday. Over $12.5 billion of foreign portfolio money has come into India this year, one of the two highest inflows in the past decade, in the first eight months. But, this time, people are sceptical. Nick Paulson-Ellis, country head of Portuguese broking firm Espirito Santo, said it bluntly in his report titled “Where is the money coming from”. He not only doubts the accuracy of SEBI’s (Securities & Exchange Board of India’s) data, but points out that FII inflows included “round-tripping of money through Mauritius and return of black money through the FII route in response to perceptions about the rupee value.” He is not alone. Most analysts agree that high inflation, low growth and frozen decisions ought to keep away foreign investors, not get them all excited about a bull market. On the other hand, a depreciating rupee works wonderfully for politicians who, in addition to looting India’s natural resources, are busy creating an election fund kitty at the best possible price. The government is also doing everything possible to make the ‘round-tripping’ easy and reassure intermediaries that there will be no nasty surprises. So the general anti-avoidance rules (GAAR) were quickly dumped.

SEBI also is busy smoothing the path of foreign investors. It has relaxed know your customer (KYC) norms and, The Hindu Business Line reports that they may be allowed to submit domestic instruments as collateral for trading in cash and derivatives. In effect, the posturing of political parties in the Parliament and the fasts and rallies of an Anna Hazare or Baba Ramdev have not made a jot of difference. Hardcore politicians are calmly preparing for elections in the only way that has worked for decades—getting ready a massive pool of funds to buy voters or elected representatives—whatever is required to keep them in power.

kannan infratech

September 23rd, 2012, 01:33 PM

I-T Department probing foreign banks, brokers in investments case

http://www.moneylife.in/article/i-t-department-probing-foreign-banks-brokers-in-investments-case/28510.html

I-T is probing suspected tax evasion to the tune of Rs800 crore during the last two years in Private Placement Programmes or PPP where an exceptional amount of returns are guaranteed within an extremely short tenure

New Delhi: The Income Tax (I-T) department is probing a few foreign banks and financial brokers after it was tipped off about large scale illegal high returns investment programme being executed in violation of guidelines issued by the Reserve Bank of India (RBI), reports PTI.

The investments and returns scheme, called the Private Placement Programmes (PPP), is devised where an exceptional amount of returns are guaranteed within an extremely short tenure and the I-T is probing suspected tax evasion to the tune of Rs800 crore during the last two years in this alleged tax crime.

According to sources privy to the development, the department was alerted about these schemes, being run by some private players and foreign banks, after economic intelligence agencies like the Central Economic Intelligence Bureau (CEIB) and others provided them with such inputs last year.

The PPP, according to RBI and tax laws, are not permitted in Indian economic channels and any investment returns programme can only be undertaken after obtaining due clearance from these agencies.

"A probe is underway. The names and identities of the case cannot be disclosed at present as the department is gathering evidence," they said.

In a typical PPP, sources said, brokers offer as much as 200-300% returns to a bank account holder over a short period of time through pledging of fixed deposits (FDs) and the resulting amount is utilised in some other high return investment avenue by the operator.

The FDs used in this scheme are worth crores and the conniving banks then issue letters of credit to the account holder and route the cash or FDs to be used for any other investments purpose, thereby skirting the legal requirements of reporting the assets on records.

The department which was given the data by snoop agencies from late 2010 has begun an exhaustive probe of all the suspicious and cash transaction reports it had received on these banks and financial intermediaries since then.

The department, according to sources, will soon begin the process of assessment in these cases and investigate the role of the people involved and also the end use of the profits generated through this scheme.

kannan infratech

September 24th, 2012, 09:25 AM

One more articile on the behaviour of Corporates & Govts:

http://www.skyscrapercity.com/showpost.php?p=95736026&postcount=15593

kannan infratech

September 24th, 2012, 01:25 PM

Big Time Cheating in the name of Gold :

http://www.scribd.com/doc/29364741/Tungsten-Genesis

kannan infratech

September 24th, 2012, 01:28 PM

Big Time Cheating in the name of Gold :

http://www.scribd.com/doc/29364741/Tungsten-Genesis

The Gold Bricks / Biscuits deposited in Bank Vaults have tungsten or silver inside.

Who has been doing this. ?:bash:

kannan infratech

September 24th, 2012, 01:50 PM

India was lauded for buying 200 tons of fresh gold from IMF, whereas Indian Govt in 1991 was forced to mortagaged 67 tons of pure gold to IMF.

Now what is the story behind ?

Fake Gold in Manhattan
Gold-Coated Tungsten Bars Still Showing Up

http://www.wealthdaily.com/articles/fake-gold-in-manhattan/3680

A ten ounce gold bar costing nearly $18,000 turned out to be a counterfeit.
The bar was filled with tungsten, which weighs almost the same as gold, but costs just over a dollar an ounce.
MyFoxNY reports:
Ibrahim Fadl bought the bar from a merchant who has sold him real gold before. But he heard counterfeit gold bars were going around, so he drilled into several of his gold bars worth $100,000 and saw gray tungsten — not gold.
What makes it so devious is a real gold bar is purchased with the serial numbers and papers, then it is hollowed out, the gold is sold, the tungsten is put in, then the bar is closed up.
Chinese Fraud
The Secret Service is now investigating this latest counterfeiting.
But this isn't the first time this has happened...
In March, gold bars filled with tungsten showed up in England, Australia, and Hong Kong.
It has even been rumored that some of the 200 metric ton gold sold to India from the IMF contained tungsten.
Of course, no one is talking.
In the short run, this will mean your ability to buy gold bars will be slowed as New York gold merchants figure out how to regain credibility (or until the whole matter is swept under the rug).
One way to avoid buying fake gold is to buy it in smaller quantities from reputable merchants. Though it requires a great deal of sophistication to fill a gold bar with tungsten, the manufacturing techniques make it more worth it in large bars versus small coins.
Wealth Daily readers have used Asset Marketing for their gold coins for years with nary a complaint. You can find them here.
Straight to the Source
The source of these fake gold bars is a criminal Chinese gang that produced them during the Clinton years.
The story goes that between 5,600 and 5,700 400oz bars — 60 metric tons — were counterfeited by a sophisticated criminal organization...
The Chinese arrested many of the perpetrators shortly after the scam was uncovered, but not before a sizable amount of the gold bars were sold...
It's thought that more than 1.5 million 400oz tungsten blanks were manufactured in the United States. Of those manufactured, some 640,000 bars received gold plating and were shipped Ft. Knox, where they remain to this day. This was the impetus for Ron Paul's call to edit Fort Knox.
The remaining bars were gold plated and sold on the international market, where they show up from time to time in cities around the world.
This begs the question about the gold resting five stories below the Federal Reserve Bank of New York...
Could the planet's largest gold vault — containing 25% of the world's gold — be counterfeit?
Of course it couldn't... but don't hold your breath waiting for clarity.

Money Printing
In the aftermath of QE3 (or what some are now calling QE-finity, due to its never-ending nature), the price of hard assets must go up in relation to the U.S. dollar over the long term.
Silver, unlike gold, is much harder to counterfeit.
Due to the industrial nature of silver, it is melted down and used in manufacturing. This is something that would be sacrilegious to do to a gold bar with its certification numbers and seals.
Thus, fake silver bars would be more likely to be discovered.
The numbers I see are that gold is more than forty times more likely to be counterfeited than silver.
The silver that is counterfeited is usually in the form of bars that weigh ten onces and up.
U.S. silver coins that were produced before 1965 that are 90% silver and 10% copper are the most likely to be be real due to their small size.
If you are looking to increase your silver hoard, look no further: Click here to invest in U.S. Silver Eagles.
All the best,

Since 1995, Christian DeHaemer has specialized in frontier market opportunities. He has traveled extensively and invested in places as varied as Cuba, Mongolia, and Kenya. Chris believes the best way to make money is to get there first with the most. Christian is the founder of Crisis & Opportunity and Managing Director of Wealth Daily. He is also a contributor for Energy & Capital. For more on Christian, see his editor's page.

kannan infratech

September 24th, 2012, 02:01 PM

More on the Big Banksters Gold Fraud :

Now RBI stocks 200 tons of Fake Gold bought from IMF.

http://gizadeathstar.com/2012/09/flash-more-fake-gold/

http://www.infiniteunknown.net/tag/india/page/8/

http://www.maxkeiseronfacebook.com/fake-gold-bars-tungsten.html

http://www.theundergroundinvestor.com/2010/02/why-the-imf%E2%80%99s-announced-sale-of-191-tonnes-of-gold-will-prove-to-be-irrelevant/

http://sanityisdead.blogspot.in/2009/11/400-oz-gold-plated-tungsten-bars.html

kannan infratech

September 24th, 2012, 02:11 PM

GLD ETF full of fake gold?

http://piggington.com/gld_etf_full_of_fake_gold

Are ETF Silver Bars Fake? Made out of Molybdenum?

http://www.youtube.com/watch?v=jNUOk9LcZcE

kannan infratech

September 24th, 2012, 02:15 PM

More Links here for those interested to know BG info.

http://ramadeva2.wordpress.com/1-white-spiritual-boy-globalists-single-account-holds-huge-amount/

kannan infratech

September 25th, 2012, 08:39 AM

http://www.businessinsider.com/walmart-controls-the-chilean-market-2012-9

Three years after entering Chile, Walmart controls a staggering 34 percent of the entire market. Walmart entered Chile in 2009 when it acquired D&S, a leading food retailer there. It promptly changed its name to "Walmart Chile" and built off the existing infrastructure. The stunning statistic about Walmart was part of a speech made by an Indian politician Anurag Thakur opposing foreign direct investments into the country. The country's "Big Bang" reforms will allow Walmart and other major retailers to sell directly to Indian consumers and will allow some retail stores to open there. He gave the remarks in a speech opposing U.S. businesses entering the emerging market, the Economic Times reported. Thakur also said that Walmart has left many shopkeepers in Chile penniless and out of business.

This report by UNI Global Union explores the impact Walmart has on suppliers in foreign countries, including Chile: "In the long term, Walmart pushes prices paid to farmers and manufacturers down rather than raising them, and producers unable to accept such concessions simply go out of business. The company is so large that it has the power to dictate the terms of suppliers’ contracts, including turnaround time, quality, quantity and price."

And the control it has in the country:

"In urban Chile, when modern retail arrived in the early 1990s, a large number of small shops went out of business in the span of just a few years. As reported in ICRIER’s May 2008 report, between 1991 and 1995, “15,777 small shops went out of business, mainly in Santiago, a city of 4 million, “representing"21-22% of small general food, meat and fish shops, 25% of deli/meat shops and dairy shops, and 17% in produce shops. Chile’s food retail sector has continued the process of consolidation to the point of negatively impacting free competition. In December 2011, government competition authorities announced an investigation of Chile’s highly concentrated grocery sector, where Walmart is the largest player with 33.4% market share, for possible price collusion of basic products including meats and detergents."

It isn't hard to see why emerging markets are wary of U.S. businesses.

kongutamizhan

September 25th, 2012, 02:55 PM

^^ Please read the journal / study that I posted few pages back on Wal-mart s impact on Latin America. That guy is lying

You can't describe an elephant by feeling / touching its tail. Organized retail is a new playing ground, a paradigm shift in retail business. So any benefits or impact should be analyzed the same way from 360 degree perspective.

satchitananda

September 25th, 2012, 03:38 PM

^^ walmart elephante $400 billion mela... hmmm

natta eppadiyum kooru pottu vikka poranga.. vikkarathu politicians vangarthu coprasions..

the inherent strength in the nation must be retained within the nation.. the key focus now seems to be aping the western model of ever increasing consumerism.. I am not saying NO for creature comforts.. or denying it for any segment.. but the focus seems to have gone off the internal wisdom this civilization was founded upon... thats the main thing to worry, rather than mere entry of FDI.. India is great only because of its past wisdom, abandoning it is suicidal.

dreadathecontrols

September 25th, 2012, 04:37 PM

look the argument is very simple.
Thailand /China said yes to fdi in the '70's
Burma/India havent even yet.

All the above countries had a much similar per cap GDP then , than they do now.

you decide which way you want your country to go.

And btw in indian company,tata, is the UK's biggest manufacturing company.
Do the anti fdi brigade complain about that?

kannan infratech

September 25th, 2012, 07:40 PM

krishnaswamy

September 25th, 2012, 09:55 PM

Railways can not be privatized. Air India can not be privatized.
Even, city sanitation, Garbage cleaning can not be privatized.

but Retail, Agri sectors can be privatized. Wah! what an idea sir ji!

Indian corporates can have resources to bid for Oil blocks, UMPP, Telecom but they dont have resources,money for Retail industry?

only FDI is capable of doing that great wonder of eliminating the middle men and our corporates do not have that capability?

Instead of regulating the middle men, only FDI is the way to benefit the consumers?

will the farmers be happy only to get money from the FDI, but not from our corporates?

When these Indian corporates imports all the technology, can't they import the technology for retail?

In spite of all these, why 51%? why it can be capped maximum to 49%?

If we get answer for all these questions, I welcome FDI in retail in India :D

On the other side of the Coin:
Walmart, Big Retail Giants Effects on U.S
What i have seen in the last 8 yrs of my experience in u.s
1. Still the farmers market exists here in u.s and people prefer Farmers market than Walmart. they prefer fresh meats from Farmers markets than the frozen meats from the Retail giants.
Even with Reliance fresh, Spencers back home, still people preferred dedicated vegetable shop, many times myself, my friends got big bulb from our home minister of buying vegetables from those big retail shops.

2. I am seeing here the value of money for IKEA products, macys, Target, Walmart
e.g the cost of furniture, quality of the furniture, its transportation cost from a shop to house in India is much more expensive than here in u.s.
If Indian consumers can be benefited with these Foreign Brands which offer good value for the money, then why not they can be allowed in India

My point here is instead of sticking "only FDI" is the medicine, better to treat the different problems in different way.

Balanced Healthy Competition, Organized Retail with Regulation and monitoring is need of the hour in India.

kongutamizhan

September 25th, 2012, 10:13 PM

Railways can not be privatized. Air India can not be privatized.

Read this recently from a news site. As tweeted by Raveena Tandon. If she is right appears like AI has improved. Any recent experiences?

https://twitter.com/TandonRaveena

Raveena Tandon ‏@TandonRaveena
Air india makes me proud again of our National carrier!was dicussing with the wonderful crew of Air india as to why people aren't aware of

Raveena Tandon ‏@TandonRaveena
The new and improved AirIndia,I guess it needs better marketing..really treated like a maharaja!!the Indian hospitalityfood was remarkable!

krishnaswamy

September 25th, 2012, 10:34 PM

Read this recently from a news site. As tweeted by Raveena Tandon. If she is right appears like AI has improved. Any recent experiences
I was thinking of writing this point on Air India.
Out of my 8 trips between India and U.S, 4 trips i have travelled in Air India(since 2004)
Air India Maharaja(Non stop between Mumbai and JFK) in 2009 was my latest experience with AI.
All the 4 times Air India international flights are damn good, hospitality is very good, comfort. (Except, you will get 40+ yrs old Air hostess for Economy class).
but, i think the issue is on overall operations that includes domestic too and the big problem in Air India is merger of Indian Airlines and Air India was not smoother.

kongutamizhan

September 25th, 2012, 10:43 PM

Except, you will get 40+ yrs old Air hostess for Economy class.

ஹம்ஹம் உம்ம வயசுக்கு ஹன்சிகா மோத்வாணி வயசுல பிகர் கேக்குதாக்கும்? :lol:

satchitananda

September 25th, 2012, 11:16 PM

ஹம்ஹம் உம்ம வயசுக்கு ஹன்சிகா மோத்வாணி வயசுல பிகர் கேக்குதாக்கும்? :lol:

indha madhiri aaalungala planela vittathe thappu.. j/k Kris... neenga dharalama imagine pannide pongo.. (make sure home minister is not around).. ippo pulla kutti vera... kutti mattum venumna odai vizhum...

But glad to hear some good anecdotal inputs on Air India.. Not to forget even Singapore Airlines learnt from the predecessor Air India .. on Maharaja service.. I guess appo irundha adhe andha kalathu Hansika thaan ipoo patti agitaanannu..

I truly believe if we eliminate corruption, maximize efficiency and infuse a real sense of pride, Air India can still be a viable entity.

dreadathecontrols

September 25th, 2012, 11:49 PM

@ dreadthe controls:

There is a big difference in FDI in other sectors and FDI in Agri Business & Retail.

Why do we need Mega Retail giants ? We can invite investments in Agri infra sector on PPP mode as we have done in Road Infra.

unfortunately the law of the markets works the same in every sector.
competition breeds eficeincy
Again, look at China. Look at Thailand. Look at burma.
It aint pretty, Capitalism but in its purest form it does what it says on the tin...
its very simple :)

Arul Murugan

September 26th, 2012, 12:03 AM

Air India, Indian Railways, AAI, SETC/TNSTC mathiri sectors ellam eppadi munnerumnu namburanganu theriyala...

Air India la orae oru nala visaiyam... food. Punctuality, inflight entertainment, hospitality, flight cleanliness, connectivity in every aspect it needs to be placed down in bottom ranking.

krishnaswamy

September 27th, 2012, 08:14 AM

1 picture speaks 100 words.
https://sphotos-a.xx.fbcdn.net/hphotos-ash3/644508_366684640076422_674656586_n.jpg

kannan infratech

September 27th, 2012, 10:05 AM

Air India service is really good in those sectors other than India - Middle East & India - Singapore / Malaysia.

Since Kuruvi population used to be very high in Singapore / Malaysia circuit and the huge number of Middle East workers (with less expectations), Air India gave very ordinary service in these sectors.

But Europe & US destinations were the best. For an Indian Vegetarian, Food available in Air India is the best. These sectors had the best of the available Air Hostesses.

(Aana Kris kku 16 - 20 vayasu kutti kekkudhu) :lol:

In Private Airlines, Paramount used to be the best in services. Esp I was really surprised by the pampering they used to give to People from the districts of Tamil Nadu who may not understand English / Hindi well. Food also was excellent.

venkyinblr

September 27th, 2012, 10:09 AM

^^Kannan Sir, by the way what happened to the Paramount Airlines..I believe they are still running 2 - 3 routes..But what happened to their blockade issues and other expansion problem...I was glad when it first started their service,after all that's the only indigenous Airline from TN

venkyinblr

September 27th, 2012, 10:11 AM

Also Air India is going on a Big-time Marketing spree since the induction of the Dreamliner.I could see Advst in almost all newspapers today.One of my friend who has been in the Air India Domestic Dreamliner flight told that it was equivalent to the international Airlines Standards and service was excellent...

kannan infratech

September 27th, 2012, 10:14 AM

venkyinblr

September 27th, 2012, 10:20 AM

^^Awww.may be thats good in one way...

kongutamizhan

September 27th, 2012, 02:23 PM

Air India service is really good in those sectors other than India - Middle East & India - Singapore / Malaysia.

Since Kuruvi population used to be very high in Singapore / Malaysia circuit and the huge number of Middle East workers (with less expectations), Air India gave very ordinary service in these sectors.

Not only AI, even the ME based airlines like ethihaad, gulf etc discriminates at that leg. Go and check abudhabi terminal. They have a third world terminal for brown folks (worse than koyembedu busstand) and international class terminals and decent flights for vellaikara naatu folks. And yeah service too is visibly better on ME to US stretch.

kannan infratech

September 27th, 2012, 04:32 PM

Some light on the Coalgate.

The UPA Government’s OPERATION COALGATE, selling off thorium, as well as starving the solar power sector was a deliberate plan to create energy scare and sign the Indo-U.S. deal to sell obsolete nuclear technology to India.

http://folks.co.in/blog/2012/09/08/no-more-mr-clean-ii-the-coalgate-conspiracy/
No more Mr. Clean II:
The Coalgate Conspiracy

N.S. Rajaram
Sep 8th, 2012

A hidden agenda?

There is a view gaining ground that the Coalgate scam conceals something far more sinister: it is part of a deliberate plan to retard India’s development especially in the energy area to enable western countries, the U.S. in particular to gain time in order to sell obsolescent nuclear power plants. Those making the charge include the veteran Statesman journalist and director of The Statesman College of Journalism Sam Rajappa who first raised the issue. (Dr. Abdul Kalam had previously hinted at the same thing.) Critics like Rajappa point to the following salient points.
Prime Minister Manmohan Singh who has been passive through most of his tenure became active and aggressive in pushing through the Indo-U.S. nuclear deal. The deal has no safeguards for nuclear power based on the thorium cycle even though India has abundant reserves of thorium and has painstaking developed the technology necessary for exploiting it. On the other hand, the uranium-based deal leaves the U.S. firmly in control of supply, technology and nuclear waste management. This was pointed out at the time by this writer and even by Dr. Abdul Kalam. The deal is quite complex but here is the gist of it

The United States expects that such a deal could spur India’s economic growth and bring in $150 billion in the next decade to American nuclear industry. At the time of signing the deal India’s stated objective was to increase the production of nuclear power generation from its present capacity of 4,780 MW to 20,000 MW in the next decade. But in the years since the deal was negotiated solar power has emerged as a major alternative. It will be easier, cheaper and safer to achieve the goal of 20,000 MW by solar than through nuclear plants.

Even before solar acquired its present critical mass—due to advances in technology and dramatic fall in the price of photovoltaic (solar) modules—experts had questioned the wisdom of dependence on nuclear power for India’s needs. The skeptics included the developmental economic consulting firm Dalberg, which advises the IMF and the World Bank. According Dalberg’s analysis, the economic value of investing in nuclear power development in India for the next 20 years are likely to be far less valuable economically or environmentally than a variety of other measures to increase electricity production in India.

Dalberg said this at the time India and the U.S. were still negotiating the deal when the cost and safety advantages of renewable sources (wind and solar) were not yet clear. This means the main beneficiary of the deal would be the American nuclear power industry, which is now in the doldrums. Developments in solar energy in the years since that time have made uranium-based nuclear power all but obsolete. This means U.S. companies are sitting on nearly a trillion dollars worth of nuclear plants and equipment which they would like to dump in India.

Power crisis conspiracy behind Coalgate

Sam Rajappa and others have charged that even the Coalgate scam is the fallout of the Sonia-Manmohan government’s policy of stalling energy development even from conventional sources like coal-fired thermal plants. Rajappa notes that Manmohan Singh exhibited an inexplicable interest in the coal ministry, hanging on to it for years:
“THE UPA II government of Prime Minister Manmohan Singh, …continually taking unjust decisions, depriving the needy of justice and robbing the poor of their rights, he has lost the right to preside over the destiny of India. In the ongoing coal scandal, the question one should ask is what made the Prime Minister cling to the coal portfolio for so long almost as if there was a dearth of talent in his jumbo Council of Ministers and that he did not have enough responsibility without poking his nose into allotment of coal blocks. No Prime Minister before him has coveted coal in quite the same manner.”

Manmohan Singh’s belated explanation that coal blocks were given at subsidized price to private companies so that the common man could get electricity, cement and steel at a reasonable price flies in the face of the dramatic inflation in the price of these items. “Cement price has scaled such Himalayan heights in the last few years that building a shelter has become out of bounds for the common man. Steel price is not lagging far behind. As far as electricity is concerned, the less said the better.”

This is not the whole story and Mr. Rajappa sees a conspiracy behind it: “Giving away coal blocks to those not equipped to mine and keeping the black gold in mother earth was a definite ploy to create a power crisis to prepare the ground for signing the Indo-US Nuclear Agreement and importing foreign nuclear reactors to generate electricity at huge cost to the exchequer.”

When Manmohan Singh took over the coal portfolio, it was mired in corruption. As charges of corruption mounted, he assured Parliament in 2006 that all future allotment would be done through competitive bidding. But this hasn’t happened. The Law Ministry advised that the change could be brought about by an administrative order, but the Prime Minister opted for an amendment to the Mines and Minerals Act to play for time. It is curious that even six years after Manmohan Singh’s assurance in Parliament, the proposed amendment to the Coal Act has not seen the light of day, while the plundering of coal by political favorites has continued.

The loss to the nation is mind-boggling. As Rajappa notes: “While the Comptroller and Auditor-General assessed the windfall gains to the coal block allottees at Rs 1.86 lakh crore, official records in the Coal Ministry tell a different story. Between 1993 and 2010, 184 mines had been allotted to favored private parties and a total of 21,531.32 million tonnes of coal had been taken out. The average sale price during this period was Rs 2,500 per tonne. The cost of exploitation, including a profit margin of 25 per cent, worked out to Rs 1,250 per tonne. By this calculation, the presumptive loss to the government is about Rs 27 lakh crore.”

If the government’s policy not to auction coal blocks was to help its utilization by power generation to speed up industrialization, one could understand. But that was not the case. The real motive, was to leave the coal in the ground until Manmohan Singh’s goal of a Indo-US Nuclear Agreement was signed and precious thorium, the future fuel of nuclear energy, was bartered away for a pittance. In addition, the beneficiaries of coal allotment could sit idle for the price of coal to skyrocket and reap a windfall profit while the power sector would be starved of the essential fuel.

The great thorium robbery
India has limited uranium reserves but is rich in thorium. Thorium is the future fuel cycle to produce long-term nuclear energy with low radio-toxicity waste. Thorium cycles are feasible in all existing thermal and fast reactors without major modifications in the engineering systems, reactor control and the reactivity devices. “Former President Abdul Kalam has been stressing the importance of India pursuing the thorium fuels route for its nuclear power plants instead of going with a begging bowl to the USA…”
Over the years Indian scientists at BARC have developed a fast breeder reactor using thorium as fuel and it has been functioning at the Indira Gandhi Centre for Atomic Research, Kalpakkam, 60 km from Chennai, for the last 27 years. “Based on the experience gained, work began on a 500 MW fast breeder reactor at Kalpakkam which should have been commissioned in 2010 Kalpakkam, but the UPA government is more interested in importing highly risky uranium based nuclear reactors from foreign countries and going slow on the indigenous technology.”

Scientists know that the long term sustainability of the indigenous nuclear power program in India depends to a great extent on large-scale utilization of its vast thorium resources for breeding uranium and recycling the same in self-sustaining closed fuel cycle in thermal breeder reactors. What the scientists have achieved the Sonia-Manmohan government has stalled to favour Americans.

But the story doesn’t end here. As with everything connected with the Sonia-Manmohan regime there is a scam to go with it— a scam that makes Coalgate seem like a pittance. Ever since the UPA government assumed office in 2004, 2.1 million tones of monazite, containing 195,300 metric tons of recoverable thorium, has disappeared from India. This export was almost certainly illegal. Mr. Rajappa observes: “If the Comptroller and Auditor-General were to audit the accounts of the IREL and the Department of Atomic Energy, custodians of fissile minerals, the Coalgate scam would look like small change. The missing thorium, conservatively estimated at $100 a ton, works out to about Rs 48 lakh crore, putting all other UPA scams in the shade.” This beggars even the Coalgate scam.

So under the Sonia-Manmohan regime we have scam following scam, each exceeding the one before. How could monazite sands (thorium ore) be exported when Atomic Energy Commission’s approval is needed for the export of any strategic mineral? By a sleight of hand, the Department of Atomic Energy, directly under Manmohan Singh, “delisted heavy minerals like monazite and ilmenite from the prescribed substances list vide SO 61 (E) dated 20 January, 2006, to facilitate their export by private companies.” So the safeguard was gone and another scam to dwarf all that went before was born.
India has the largest mineral sands resources in the world. These are also among the least exploited resources having a high potential to meet the country’s nuclear energy needs. First the Germans, then the French and now Americans have cast their covetous eyes on this invaluable resource. Their export was banned soon after independence. The beach mining sector was opened to private entrepreneurs in 1998 but the export of beach sands registered a quantum jump after 2005, immediately after UPA came into power. Then, even radioactive minerals like thorium sand were allowed to be taken out of the country unchecked.

Conclusions

It is not easy to unravel the labyrinthine web of scams that have proliferated like mushrooms under the Sonia-Manmohan regime but two themes seem to stand out. In major decisions, foreign, especially European interests seem to take precedence over Indian interests.

Leaving aside the unseemly triviality of Manmohan Singh groveling before the Italian swindler Ottavio Quattrocchi, there was the recent transfer of $12 billion from India to Europe to supposedly “support the euro”, but went mainly to help Italy on the verge of default. (Why should India help the euro when even the U.S. and U.K. stayed aloof, let alone help Italy? Did they help the Indian economy when the rupee was in the doldrums?)

Next, the energy sector, especially its independence has been starved of fuel retarding development. While the financial aspect of Coalgate has garnered the Lion’s Share of attention, it should be noted that leaving coal in the ground by operators with no mining competence has left idle many power plants leading to severe shortages. This, Mr. Rajappa suggests was to buy time to sign the Indo-U.S. nuclear agreement. This deal, by forcing India to buy risky uranium-based technology has undermined the thorium based approach where India holds the advantage. It is no secret that thorium meets India’s nuclear needs better than uranium.
To this must be added India’s neglect of the solar energy option in addition to river linking which would solve many of country’s pressing problems in water and energy. This writer’s recent queries at the Planning Commission indicate that these are low priority items and the government is more interested in social welfare programs like the NREGA. All this, according the Mr. Rajappa and others suggests a conspiracy to keep India energy deficient. In other words it is part of the conspiracy to force India to buy American nuclear technology.
As a rule this writer is averse to conspiracy theories. But there are far too many too loose ends that point to decisions and actions that go against the national interest. There is an old military proverb. If something bad happens once it is accident; if it happens twice, it is coincidence; if it happens a third time it is enemy action. This is how one may view the Sonia-Manmohan scam ridden regime.

Mr. Rajappa concludes his study with the appeal: “The greatest service Manmohan Singh could do to the nation before another scam even bigger than the great thorium robbery surfaces is to resign and go. Surely we have had enough of his leadership.”

[Sic: Rather his service— but to whom? NSR]

Conspiracy or not, this much can safely be said:

Singh is no king; he will happily sing any tune he is ordered to.