Wednesday, November 30, 2011

FDI in Retail

The big question being asked now a days, FDI in retail is good or bad. I really don't know so I decided to verify the argument of pro-FDI groups that there are lots of inefficiencies in the supply chain and that's why we need FDI. So I looked at the prices of certain vegetable items on 26-November-2011 in one of the Karnataka Mandis and compared it with the prices that I paid on the same day with one of the retailers. The chart on the right shows the price markup that I was subjected to the price between one of the Karnataka mandis to what the retailer charged me. As we can see that in most cases the markup is upwards of 50%, much closer to 100% with highest markup being 400%.
This is the case with vegetables which are perishable goods and have to be sold by the end of the day, one would assume that the prices of these goods would have least markup.
For people who want to verify, here is the data that I compiled and used.

Store PriceOne of the Karnataka Mandi
Tur Dal89.939.25
Bottle Gourd357

So, there is definite markup, in many cases it does sound un-reasonable but whether bringing FDI in retail really solves this problem, I am not so sure. Anti-FDI people claim that MNCs are just for profit and they may squeeze everybody. So looks like complicated issue but in my experience, additional competition has always helped customer.

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