FDI in retail to hurt startups, small businesses the most

The Congress-led UPA II’s decision to let foreign direct investment (FDI) in multi-brand retail has sparked an animated debate in the country with some deadly against it and others supporting it. The proponents of the FDI argue that this would open up opportunity for small farmers and end middlemen. They may be right but the fact is that the entry of retail giants has the potential to hurt small retailers in countryside in the long run.

For the time being big retailers like Wal-Mart of the US and other western countries will base their showrooms in big cities. But as they establish themselves and win captive audiences they will certainly try to fan across the country. It is then that small businesses will be hurt the most. To compete with big retailers, who have deep pockets, would be a difficult task. Rather it would be something impossible for startups and small businessmen.

This is a global phenomenon and small businesses have been crippled in West too after the arrival of big retailers in their areas. Though the government promises that nothing like this will happen but this fact cannot be denied.

Buyers will hit big retailers from where they could get dirt-cheap materials. In the West and the US too people look for places from where they can get cheap stuff. The mom and corner shops have taken a beating in these countries too.

It is high time the government relooked at the whole thing and saved employments and small businesses from further hardship. The best practice would be to control prices and give stern warning to small businessmen to follow rules or face action.