The proposal to permit foreign direct investment in multi-brand retail could spell doom for consumers and traders as foreign investors will dry up existing supply chains and then jack up prices to exploit the situation to their benefit, according to a top official of a traders' body.
"Consumers and traders will be at the receiving end if the United Progressive Alliance decides to introduce FDI in the retail sector.
"The international traders never face genuine competition in the market, but follow a policy of concentration of goods and dominance in the market," said B C Bhartia, the National President of the Confederation of All India Traders.
"These FDI investors will put in a lot of money and also spend huge money. Obviously their expectations will be high.
They jack up prices of commodities instead of selling goods at comparative rates and virtually compel consumers to take more quantity of goods and also compromise on quality," he told PTI.
With full control over the supply chain, FDI investors will dry up the existing sources on which traders are fully dependent and exploit the situation to their benefit to earn profits.
Since FDI investors have a huge financial loss-bearing capacity, they will virtually make the local traders run for money, Bhartia -- a professional chartered accountant with a background of family business in trading --
To a query on states exercising options not to accept FDI, Bhartia said FDI investors are known for acquisitions and mergers.
"They will in due course take over companies having operations or a market presence in multi-states. By this route, they will automatically reach the 'no entry zones' or states not interested in FDI in the retail sector," he said.
By adopting franchise models, these foreign trading firms will go to small towns and big villages that they can not access now as per the policy, Bhartia said.
On the stance taken by political parties on FDI, he noted that it was the Congress which had opposed FDI when the Bharatiya Janata Party-led National Democratic Alliance government wanted to allow it.
"Congress stood with the trading community and vehemently opposed the NDA move," he said.
Furthermore, the argument that these investments will bring job opportunities to unemployed youth is wrong, he claimed.
Presently, the existing trading community is providing employment to thousands of youth, but the new policy will only provide a few jobs to English-speaking youths in multinational companies.
Existing employees of traditional kirana stores may be displaced by the FDI investment, Bhartia added.
