• PAGE ONE
• INDEX
• HOME

Retailing FDI

THE CENTRE HAS virtually made its intentions clear on opening the retail sector to foreign direct investment with the Group of Ministers reassessing the policy which now has the door shut. But there are bound to be many twists and turns before intent tra nslates into action. For, while the proponents of FDI in the retail sector are many, ranged against them in even larger numbers are the naysayers. Already, protests against the Governments intent have flared up in Mumbai, and these could gain momentum ar ound the country.

Ever since quantitative restrictions were lifted on a swathe of goods, there has been a flood of products, especially in fast moving consumer goods, flowing into the metros. So, the argument goes, when all manner of goods are available, why should their purveyors foreign retailers be kept out? But the issue is not so simple. Despite being one of the least evolved and fragmented of sectors, retail trade featuring lakhs of small shops accounts for around 11 per cent of GDP and employs over 25 million pe ople or 8 per cent of the total workforce.

The most compelling argument for allowing FDI in retail is that it can generate some 8 million jobs in a few years. The organised trade, though forms only 2 per cent of the overall retailing cake, has been creating jobs and alternative career paths for hundreds of school and college students; retail is no longer infra-dig with the middle-class. Given that one doesnt need college education to work in a retail environment means that even high-school drop-outs, who do so because their families cannot affo rd it, are finding avenues of employment. . Several retailing groups, originating from Chennai have even given jobs to children of daily-wage earners, a definite leg-up for these young people and their aspirations. Foreign retail groups muscling in would mean not just more jobs, but also poaching of competent staff from existing retail chains, in turn, ensuring better wage levels.

The flip side, as the argument goes, is the entry of MNC retailers with deep pockets could mean the end of thousands of small retailers. Without any means of livelihood and in the absence of a social security system, the situation is potentially explosiv e. Already, in a small way, existing organised retailers, especially of food and grocery, are forcing the corner-store to shut shop or think of novel ways to keep customers. MNC players, such as the UKs Tesco, the French Carrefour or the German Metro gro up, (which is already here in the wholesale business), will have a long-term view and with their deep pockets and strategic pricing could corner a chunk of the market in course of time.

So, these fears may not be unfounded. But retailers, both foreign and Indian, will have to reckon with the canny, value-for-money Indian shopper, as many home-grown chains teetering on the brink have come to realise. MNC retail chains by virtue of their size and required volumes will willy-nilly have to operate in the top 20 cities. As in many other sectors, their entry will pretty much leave the `other India untouched. So, it is only the urban trader who is worried. While the crores of rupees of invest ment that large retailers will bring in is welcome, a `calibrated entry of MNC players would be in order. What about the consumer? If foreign investment in retailing means lower prices, efficient service and exciting products, he wouldnt have reason to c omplain.