Whispers In The Aisles
Is FDI in retail back on the agenda?
Slowly but surely, the government is laying the ground for FDI in multi-brand retail. Currently 51% FDI is allowed in single-brand retailing, 100% FDI in wholesale business.
When will it all happen?
It's a political hot potato—opening up multi-brand retail would impact small kirana stores. Currently, a discussion paper is being finalised. The government insists there is no time-frame.
Who's supporting FDI?
UPA-II has been sending out clear signals in favour of FDI, saying competition is crucial to reduce high food prices, cut out gains made by the middleman, and reduce wastage.
Who's against it?
The biggest opponents are the Left parties. On the face of it, BJP-supported trader groups and farmer groups have been voicing protests too. Some big domestic retail majors have been stealthily
lobbying against FDI, but are lying low for now.
Who will be the first movers?
Global retailers like WalMart, Metro, Carrefour, Ikea, Auchan, Tesco and so on will be quick to start front-end operations and not be restricted to wholesale.
The rumble in the retail jungle is getting louder. Four years after allowing global brands to enter the retail scene via the franchise route, the government is now looking at the next step—allowing multinationals to enter multi-brand retailing (or your neighbourhood supermarket) and not restricting FDI to high-end single-brand or wholesale operations.
Make no mistake, this is the Holy Grail for a nation of shopkeepers—and shoppers. It’s also controversial. There is no consensus, not even within the Opposition, on whether further opening up the retail sector to foreign investors will boost the economy. Or whether it will spell the kiss of death for millions of neighbourhood kirana stores. While the UPA has been drumming up support for FDI in multi-brand retail, it’s treading cautiously. With big domestic retail willing but cautious, the stakes are high.
The government hopes to serve up some answers once its detailed discussion paper on FDI in the retail sector (on the lines of a similar paper on FDI in defence, hosted on the Department of Industrial Policy and Promotion—DIPP—website) is finalised. “Some stated positions will come out through the discussion once the paper (including all the diverse views) on retail has been put in the public domain,” says Gopal Krishna, joint secretary in DIPP, without specifying which way the report will swing.
Two years back, ICRIER, a leading think-tank, came out with a study saying there would only be a “short-term impact” on kirana stores within two km of an organised retail chain. But, the report concluded, their niche appeal, together with some sprucing up, would help kirana stores sustain. A year later, another report by an all-party 30-member parliamentary committee chaired by M.M. Joshi came out with a contrary view.
The fact that the government recently brought in new, restrictive norms for wholesale operations shows that some of the parliamentary committee’s observations were valid. High food inflation, however, has been an ally in forcing a rethink in the government’s stand on FDI in multi-brand retail. Since early this year, several ministers—including the prime minister—have been advocating that a greater push towards organised retail, helped by FDI inflows, could check high inflation and generate more jobs.
It helps for now that the opposition to such a move—led by the Left—is muted. CPI(M) leader Brinda Karat says the claim of greater employment generation through organised retail “does not reflect in the numbers”. Fellow partyman Nilotpal Basu points out that if farmers were benefiting, “we wouldn’t be clocking negative agriculture growth”. While Basu echoes the parliamentary committee demand for “regulation” of corporate retail chains, observers feel the Left will wait for more clarity from the government’s discussion paper before moving forward.
Farmers too, for the most part, don’t repose much faith in the modern retail story, “as the retail chains are looking at their own profit and trying to force farmers to sell below market price”, alleges Raju Shetti, founder, Swabhimani Shetkari Sanghatana. But despite the cynicism, Shetti feels there is more to fear from the present system of political patronage than an arrangement that ensures firm buying arrangements and technical support. Wary of being “let down” as in the past, farmer groups will watch carefully to “protect their interests”.
That the opposition is easing is evident when, contrary to the tough stand being mounted by the Confederation of Indian Traders’ Association (CAIT), the convenor of bjp’s economic cell, Jagdish Shettigar, takes a more pragmatic view. Emphasising that practically everybody as a consumer stands to benefit when service as also the price are favourable, Shettigar regrets that the benefits of organised retail, which currently has only five per cent market share, are still to be realised. “Politically, no one’s comfortable due to misconceptions about its impact,” he warns.
As decision-makers point out, besides small traders and some political parties, a few of the domestic retail biggies—like the Future Group, Tatas and Reliance—have been playing on the “bogey of small retailers” to keep foreign competition out. “Almost certainly the resistance has come from select Indian players, though on the face of it they may support FDI in retail,” says Arvind K. Singhal of retail consultancy Technopak Advisers. Apart from the Bharti-WalMart joint venture, he points out, none of the others have a firm alliance. Instead, they have used the restrictions to entrench themselves.
Dismissing the notion of being an opponent, Future Group chairman Kishore Biyani alleges that “too much was being read into my stance”. He adds, “Retail is the last leg of economic activity. Whatever needs to be done should be done to promote it. It would help if FDI in multi-brand retail is opened up to 49 per cent in a calibrated approach.” If domestic industry seems open to FDI, it also wants to seek foreign alliances without handing over the reins.
It helps that retailers are lying low after the slowdown. “Now everybody concurs that we need more FDI in retail to allow people to access funds from those who understand the business and will also infuse some technical know-how,” avers Kumar Rajagopalan, CEO, Retailers’ Association of India. With many retail majors having overexpanded, an infusion of foreign funds and management expertise seems inevitable. But there will be many “ifs and buts and qualifications galore” before alliances are allowed to be forged. The UPA will shop around carefully—but shop around it will.
The article on FDI in retail is welcome (IKEA’s Time Come?, May 31). Branding is the most profitable step from production till sale, but is not recognised in India, our iims notwithstanding. And don’t complain about farmers not earning enough; things would not be any better if left as they are. Kunwar Rana, Varanasi
In the ’80s and ’90s there were thousands of corner shops in the UK. Today, you’d find one with difficulty, for Tesco’s started 24-hour shops. They sell everything, from medicines to glasses and insurance! I foresee the same in India, where millions rely on small business. George, London
We at Outlookindia.com welcome feedback and your comments, including scathing criticism
1. Scathing, passionate, even angry critiques are welcome, but please do not indulge in abuse and invective. Our Primary concern is to keep the debate civil. We urge our users to try and express their disagreements without being disagreeable. Personal attacks are not welcome. No ad hominem please.
2. Please do not post the same message again and again in the same or different threads
3. Please keep your responses confined to the subject matter of the article you are responding to. Please note that our comments section is not a general free-for-all but for feedback to articles/blogs posted on the site
4. Our endeavour is to keep these forums unmoderated and unexpurgated. But if any of the above three conditions are violated, we reserve the right to delete any comment that we deem objectionable and also to withdraw posting privileges from the abuser. Please also note that hate-speech is punishable by law and in extreme circumstances, we may be forced to take legal action by tracing the IP addresses of the poster.
5. If someone is being abusive or personal, or generally being a troll or a flame-baiter, please do not descend to their level. The best response to such posters is to ignore them and send us a message at Mail AT outlookindia DOT com with the subject header COMPLAINT
6. Please do not copy and paste copyrighted material. If you do think that an article elsewhere has relevance to the point you wish to make, please only quote what is considered fair-use and provide a link to the article under question.
7. There is no particular outlookindia.com line on any subject. The views expressed in our opinion section are those of the author concerned and not that of all of outlookindia.com or all its authors.
8. Please also note that you are solely responsible for the comments posted by you on the site. The comments could be deleted or edited entirely at our discretion if we find them objectionable. However, the mere fact of their existence on our site does not mean that we necessarily approve of their contents. In short, the onus of responsibility for the comments remains solely with the authors thereof. Outlookindia.com or any of its group publications, may, however, retains the right to publish any of these comments, with or without editing, in any medium whatsoever. It is therefore in your own interest to be careful before posting.
9.Outlookindia.com is not responsible in any manner whatsoever for how any search engine -- such as Google, Bing etc -- caches or displays these comments. Please note that you are solely responsible for posting these comments and it is a privilege being granted to our registered users which can be withdrawn in case of abuse. To reiterate:
a. Comments once posted can only be deleted at the discretion of outlookindia.com
b. The comments reflect the views of the authors and not of outlookindia.com
c. outlookindia.com is not responsible in any manner whatsoever for the way search engines cache or display these comments
d. Please therefore take due caution before you post any comments as your words could potentially be used against you
10. We have an online thread for our comments policy:
You are welcome to post your suggestions here or in case you have a specific issue, to directly email us at Mail AT outlookindia DOT com with the subject header COMPLAINT