FDI in multi brand retail will not solve the problem

According to Economic survey 2010-11, inefficient logistics and supply management and, insufficient cold storage are the main attributes of current inflation. Government proposed FDI in multi brand retail to tackle the inflation assuming foreign retailers bring know -how in logistics and supply management. They also invest in cold storage. These cold storage will augment the existing government's storage houses. Strong argument for the FDI in multi brand retailer is that it eliminates the middlemen so it benefits both producer and farmer. But it's unlikely that everyone will get benefited from this investment.

• Lower prices at producer will not directly passed to the consumer. Prices at consumer mainly depends on supply and demand gap but not at which retailers buy from producer. Big retailers monopolize the market - they have their own terms. Prices may not be lesser than present prices at retailers and farmers may not get more than what they are getting today.
• Big multi brand retailers usually target middle and above middle class by providing high quality and processed food. During the processing and value addition around 10 - 20 per cent raw food is wasted. So it further increases the prices. Low income group people are the most affected.
• Processed food contains higher amount of salt to preserve the food for long time. Higher amount salt is not good for health.
• It's a myth that it increases the employment. It actually substitute the unorganized retailers by a few organized jobs. Overall unemployment increases.
• No one knows how their know-how in logistics and supply management will address the insufficient infrastructure in rural areas. 

This investment is wrong prescription to tackle inflation and other related issues. May be good for a section of the people but it badly affects the people in lower income category as this investment increases the prices outside retailers. Government should investment in cold storage and tackle the illegal holdings by structural reforms. Government should have released the surplus grains from the government godowns to address the inflation and inflation expectation. This is what was done in 1972 to address the inflation.