Abstract
Based on a review of the procurement practices followed by the supermarket chains in both India and abroad to explore the implications of liberalization of FDI in retail on the different stakeholders in the agri-food system, this chapter concludes that new set of organizations and institutions brought in by the supermarket chains such as contracts and private standards often result in rationalization of suppliers, leading to the exclusion of small farmers in the modern supply chains. The small farmers with low level of human and physical capital managed to supply to these chains only when they work through collective organizations or preferred suppliers. The study further notes that the procurement practices of the Indian supermarket chains do not ensure benefits of transfer of technology as most of the procurement happens through collection centres without any formal contract and commitment to buy, and are initiated only to increase their market share. The liberalization of retail FDI will only accentuate the diffusion of supermarkets, bringing with it the effect of ‘Retail Darwinism’, which will reduce the employment in the retail sector. Moreover, the rapid diffusion of supermarket will lead to concentration of market power, and the lack of competition may lead to rise in consumer prices.
According to the author, India does not have adequate institutions and effective governance in place to regulate and monitor the operations of the global retailers to ensure fair prices to the farmers. Moreover, there is no mechanism to ensure that the supermarkets procure from small and marginal farmers nor is there any institution to ensure that the farmers get fair prices without any delay. The study concludes that there should be greater level of preparedness in terms of producer institutions, regulations and well- tailored incentives for inclusiveness in the agri-food system.
Originally published in Review of Market Integration, Vol. 4, No. 3, pp. 284–308. Copyright 2012 © India Development Foundation. All rights reserved. Reproduced with the permission of the copyright holders and the publishers, Sage Publications India Pvt. Ltd., New Delhi.
This is a preview of subscription content, log in via an institution.
Buying options
Tax calculation will be finalised at checkout
Purchases are for personal use only
Learn about institutional subscriptionsReferences
Bagaria A (2012) Is reliance retail’s performance matching mukesh ambani’s expectations? Images Retail 11(6):54–62
Bijoor H (2011) Small is beautiful, but big is cheaper. The Hindu Business Line, Dec 1, Brand Line p 4
Blandon J, Henson S, Cranfield J (2008) Small-scale farmer participation in new agri-food supply chains: case of the supermarket supply chain for fruits and vegetables in Honduras. J Int Dev 21(7):971–984
Boselie D, Henson S, Weatherspoon D (2003) Supermarket procurement practices in developing countries: redefining the roles of the public and private sectors. Am J Agric Econ 85(5):1155–1161
Cadilhon J-J, Moustier P, Poole ND, Tam Tam PTG, Fearne AP (2006) Traditional vs. modern food systems? Insights from vegetable supply chains to Ho Chi Minh City (Vietnam). Dev Policy Rev 24(1):31–49
Chandrasekhar CP (2011) The retail counter-revolution. The Hindu, Nov 30, p 10
Chen K, Shepherd AW, da Silva C (2005) Changes in food retailing in Asia: implications of supermarket procurement practices for farmer and traditional marketing systems. AMMF Occasional Paper 8. FAO, Rome
Chowdhury SK, Gulati A, Gumbira-Sa’id E (2005) The rise of supermarkets and vertical relationships in the Indonesian food value chain: causes and consequences. Asian J Agric Dev 12(1&2):39–48
Central Institute of Post-Harvest Engineering and Technology (CIPHET) (2010) Assessment of post harvest losses of crops and livestock produce, AICRP on Post harvest technology. CIPHET, Ludhiana, a presentation
Competition Commission (2008) The supply of groceries in the UK: market investigation, UK. April. www.competition-commission.org.uk
Durand C (2007) Externalities from foreign direct investment in the Mexican retailing sector. Camb J Econ 31(3):393–411
Dutta D (2011) FDI in retail: more heat than light. Financial Express, Nov 26
Ernest and Young (2009) Flavours of Incredible India: opportunities in the food industry, Ministry of Commerce and Industry, GoI. MFPI. GoI. and FICCI. New Delhi
Farina, EMMQ, Nunes R, Monteiro G F de (2005) Supermarkets and their impacts on the agrifood system of Brazil: The competition among retailers. Agribusiness 21(2):133–47
Ghezan G, Mateos M, Viteri L (2002) Impact of supermarkets and fast-food chains on horticulture supply chains in Argentina. Dev Policy Rev 20(4):389–408
Hernandez R, Reardon T, Berdegue T (2007) Supermarkets, wholesalers, and tomato growers in Guatemala. Agric Econ 36(3):281–287
IMAGES-ASIPAC (2011) Cracked open-the impact of foreign direct investment on the India retail sector. Images Retail 10(12):64–74
Kaufman PR, McDonald JM, Lutz SM, Smallwood DM (1997) Do the poor pay more for food? Item selection and price difference affect low income household food costs. ERS report No. 759. ERS, Washington DC, November
Kumar DK, Basavaraja H, Mahajanshetti SB (2006) An economic analysis of post harvest losses in vegetables in Karnataka. Indian J Agric Econ 61(1):134–146
Louw A, Vermeulen H, Madevu H (2006) Integrating small-scale fresh produce producers into the mainstream agri-food systems in South Africa: The case of a retailer in Venda and local farmers for Regional consultation for linking farmers to markets: Lessons learned and successful practices. Cario. Egypt. http://www.globalfoodchainpartnerships.org/cairo/papers/AndreLouwSouthAfrica.pdf
Mei L, Shao D (2011) Too cheap hurt farmers, too expensive hurt customers: the changing impacts of supermarkets on Chinese agro-food markets. Millenn Asia 2(1):43–64
Minten B, Reardon T, Sutradhar R (2009a) Food prices and modern retail: the case of Delhi. World Dev 38(12):1775–1787
Minten B, Randrianarison L, Swinnen JFM (2009b) Global retail chains and poor farmers: evidences from Madagascar. World Dev 37(11):1728–1741
Miyata S, Minot N, Hu D (2009) Impact of contract farming on income: linking small farmers, packers, and supermarkets in China. World Dev 37(11):781–1790
Mookerji N (2011) A whole new opportunity. Business Standard, the Strategist, Nov 28, pp 1–3
Moustier P, Tam TG, Anh DT, Binh VT, Loc NTT (2010) The role of farmer organizations in supplying supermarkets with quality food in Vietnam. Food Policy 35(1):69–78
Murthy DS, Gajanana TM, Sudha M, Dakshinamoorthy V (2009) Marketing and post-harvest losses in fruits: its implications on availability and economy. Indian J Agric Econ 64(2):259–275
Neven D, Odera MM, Reardon T, Wang H (2009) Kenyan supermarkets, emerging middle-class horticultural farmers, and employment impacts on the rural poor. World Dev 37(11):1802–1811
Pritchard B, Gracy CP, Godwin M (2010) The impacts of supermarket procurement on farming communities in India: evidence from rural Karnataka. Dev Policy Rev 28(4):435–456
Pulamte L (2008) Key issues in post harvest management of fruits and vegetables in India. www.nistads.res.in/india/2008. Accessed 13 Sept 2011
Reardon T, Berdegue Julio A (2002) The rapid rise of super-markets in Latin America: challenges and opportunities for development. Dev Policy Rev 20(4):371–388
Ruben R, Boselie D, Lu H (2007) Vegetables procurement by Asian supermarkets: a transaction cost approach. Supply Chain Manage: Int J 12(1):60–68
Sako M (1992) Prices, quality and trust: intern-firm relations in Britain and Japan. CUP, Cambridge
Schwentesius R, Gomez MA (2002) Supermarkets in Mexico: impacts on horticulture systems. Dev Policy Rev 20(4):487–502
Sharma G, Singh SP (2011) Economic analysis of post-harvest losses in marketing of vegetables in Uttarakhand. Agric Econ Res Rev 24(2):309–315
Singh S (2010) Implications of FDI in Food Supermarkets. Econ Polit Wkly 45(34):17–20
Singh S (2011) Controlling food Inflation: do supermarkets have a role? Econ Polit Wkly 46(18):19–22
Singh S, Singh T (2012) Producer companies in India: a study of organisation and performance. Draft report submitted to MoA, GoI. IEG, Delhi
Singh S, Singla N (2011) Fresh food retail chains in India: organisation and impacts. Allied, New Delhi
Stichele MV, Wal S, Oldenziel J (2006) Who reaps the fruit? Critical issues in the fresh fruit and vegetable chain. Centre for research on multinational corporations (SOMO), Amsterdam, June
Sulaiman V R, Kalaivani NJ, Handoo J (2010) Organised retailing of fresh fruits and vegetables: is it really helping producers? Working Paper: 2010–01, Centre for Research on Innovation and Science Policy (CRISP), Hyderabad, India
Verma A, Singh KP (2004) An economic anlaysis of post harvest losses in fresh vegetables. Indian J Agric Mark 18(1):135–1439
Wiggerthale M (2007) Expansion of supermarkets in the food sector: who reaps the benefits? Presented at the G8 Alternative Summit, June, Rostock. www.fairer-agrarhandel.de/mediapool/16/163463/…/Supermarkets_G8.pdf. Accessed 19 July 2010
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2016 Springer India
About this chapter
Cite this chapter
Singh, S. (2016). Role of FDI in Multi-brand Retail Trade in India and Its Implications. In: Rao, N., Radhakrishna, R., Mishra, R., Kata, V. (eds) Organised Retailing and Agri-Business. India Studies in Business and Economics. Springer, New Delhi. https://doi.org/10.1007/978-81-322-2476-1_9
Download citation
DOI: https://doi.org/10.1007/978-81-322-2476-1_9
Published:
Publisher Name: Springer, New Delhi
Print ISBN: 978-81-322-2475-4
Online ISBN: 978-81-322-2476-1
eBook Packages: Economics and FinanceEconomics and Finance (R0)