Even as political parties continue to debate the merits and de-merits of allowing entry of foreign retailers, some small and medium enterprise (SME) associations in the northern region have vociferously opposed the entry of foreign supermarket chains.
P D Sharma, president of the Apex Chamber of Commerce Undertakings, said that though it is being claimed that FDI in multi-brand retail will benefit SMEs (since 30 per cent of sourcing will be from them), it is well-known that developed countries cite extraneous factors as excuses for not purchasing from Indian manufacturers.
He said factors such as “use of child labour and violations of human rights” by manufacturers are cited as grounds for rejecting the products of Indian companies.
“In recent years a new trend has been seen mainly in the European countries. Labels are fixed on products showing the quantity (in grams) of carbon dioxide emissions associated with making and transporting them. This began in the year 2007 in Britain and the trend is catching up fast,” he added.
Considering these factors Sharma believes that it would be difficult for the SME sector to benefit from FDI in multi brand retail.
Also, he adds, the Indian SME sector will find it tough to compete with its counterparts in other countries, because of high costs. Indian SMEs get capital at a high cost, they obtain raw materials through cartelised mechanisms and transaction costs in India are high. Obviously, no global retailer will purchase costly products from Indian industry, Sharma said.
S K Jain, chairman of the MSME Garment Manufacturers Association of Ludhiana (MGMAL), opposing the entry of foreign retailers into India, said foreign retailers having deep pockets would easily put small traders out of business by offering steep discounts.
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“Once foreign retailers create a monopoly, they will exert pressure on domestic SME suppliers, thus making it difficult for them to run their businesses smoothly.”
MGMAL, which was established last year, is an association of Ludhiana-based garment manufacturers that have joined hands to raise the issue of delays in payments to SMEs by buyers -- mostly retail chains. Upkar Singh, a spokesman of the Chamber of Industrial and Commercial Undertaking (CICU), said the decision to allow FDI in retail would affect millions of micro and small enterprises. Already their value addition was very low and most of them were struggling to survive. The Central government should instead strengthen marketing opportunities for small-scale manufacturers, he added.