Parliament has been blocked for over a week, A Bharath Bandh has been called over the issue and every prime time news show seems to be debating over the next step for the government. All over the contentious cabinet decision to allow foreign direct investment up to 51% in Retail. The Opposition is gunning down any opportunity of a compromise while the country eagerly awaits its elected representatives to actually go about doing their job mellowing down the partisan war that is being waged.
The Opposition, both from outside and inside the UPA, is pleading the case of the small trader – The Uncles we so fondly buy milk and eggs in the morning from. They argue that if FDI is permitted, Foreign Retail Giants such as Walmart and Tesco will set up shop and the entire Indian Public will flock en masse to these stores.
I find this argument a bit too optimistic. I, for one, strongly back the decision to allow FDI in the Retail Sector and I also know for a fact that my neighbourhood Kirana Store will still have the same amount of daily business. I base my convictions on the simple fact that If Indian Retail Giants such as your Big Bazaars, Reliance Fresh’s can’t force your neighbourhood Kirana Shops out of business, what basis does the argument that only your Walmarts and Tescos will?
The fundamental difference between Mr. Shetty’s shop and your Tesco is the type of people each type of business attracts and the nature of transaction involved. People who tend to go shop at Big Bazaar and eventually Walmart, comprise of the growing Urban Middle Class. These are people who hunt for bargains and value deals which come with quantity. Certainly, this would mean Increased competition for the likes of Reliance Fresh not Mr.Shetty’s store.
What people tend to generally forget, in all this emotional hullabaloo, is that such Super Stores come up only in Select Locations, usually near busy business/commercial areas. Keeping this fact in mind, the very same people who purchase monthly at these stores will continue to buy Milk and Eggs and Vegetables from the Kirana Shop as they don’t have drive to the store but can take a leisurely stroll while buying their daily rations. So irrespective of whether Walmart opens 4 km away from my place, my neighbourhood store is here to stay, for they very fact that it still caters to the neighbourhood.
The Real opposition to FDI comes from Consumer Product Giants such as your Ariel, Tide, Rin and the vicious network of Middlemen between the Farmer and the various traders. If players as big as Walmart setup operations here, companies which market consumer products will have to settle for less, much less. In their eyes, smaller the trader, easier it is to negotiate and greater the profit margins. All of this will go away due to the sheer buying power of massive retail chains. Moreover, these chains buy directly from the producer eliminating the middlemen network and directly benefitting the farmer. These are the grave interests that this decision protects and the Opposition neglects blatantly.
This entire FDI Battle is sort of a Déjà vu, serious arguments having been made when Dr.Manmohan Singh set out to liberalize the Indian Economy. Serious concerns were raised in 1991 about whether Indian companies would really stand up to the competition and we all owe our current economy and lifestyle to the decision they took then.
As We have learnt to accept the existence of KFC alongside our traditional Darshinis with both forms doing extremely well, it is only a matter of time before we come across and accept a Walmart next to your local Kirana Shop.
View Rahul Kayala's profile
Posted on December 2, 2011
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