Let me make it clear at the outset that the people of India should respond to that question. Or, at least a small subset of the people of India who have access to the Internet and may read this post. In other words, you, dear reader, get a chance to voice your opinion.
An opinion based on gut feel, or hearsay, or belief does not count for much. So, I’m going to present some cold, hard facts (from a reasonably reliable though may be a biased source – the current Secretary General of FICCI – published in a newspaper article today). Please read the facts, and then decide.
1. The idea of FDI in retail was proposed by the NDA government 7 years back. (It also found a place in BJP’s election manifesto in 2009. Yes, the same BJP which is now making a song and dance about opposing it and stalling Parliament proceedings.) The UPA is finally taking steps to implement this important economic reform.
A very uncomfortable Yashwant Sinha, when cornered by a TV journalist about the above, said: “Lot of water has flown down the Ganges. I have become older and wiser.” (Why is it that people become wiser when they are no longer in power? It’s a rhetorical question – no need to answer it!)
2. The retail market is expected to double from its current size of $490 Billion to $1 Trillion over the next 20 years. The current share of organised retail (including foreign ones) is expected to quadruple from 4% to 16%. That means, the market size for the ‘kirana’ type stores will go up from the current $470 Billion to $840 Billion over the next two decades. (Forget about job losses!)
3. Large format retail stores with FDI will be permitted in cities and towns with a population of 10 Lakhs or more. About 53 such cities and towns will make the cut today. This number is expected to increase to 76 in the next 20 years. (Not likely to be a plunder of the country like the East India Company did.)
4. More than 30 Crore people are expected to migrate to urban locations from the hinterland over the next two decades. The ‘kirana’ stores are unlikely to be able to meet the extra demand or employ a significant percentage of the influx.
5. To maintain India’s GDP growth rate at 9%, 1.2 Crore additional jobs will need to be created every year for the next 15 years. Such a large number of jobs are unlikely to be created by manufacturing units (which rely more and more on automation) or IT services (which is reaching growth limits).
6. Despite presence of large format retail stores like Spencers, Big Bazaar, Reliance Fresh, Trends - ‘kirana’ stores haven’t gone out of business. Both small and big format stores are co-existing.
7. The real differentiator in retail business is not at the front-end, the actual stores where we go to buy clothes or lipstick or kitchenware. It is the back-end operations involving logistics, supply chain management and sophisticated computer systems. These require knowledge, experience and large investments.
Large format retailers in India have managed the front-end well, raising the shopping experiences of Indians. But they have fallen way short in the back-end operations.
You have the facts. Now, it is your turn to opine. Will FDI in multi-brand retail be good for India, or will it be bad?
Related Post
