FDI In Retail: It Looks Like A Win-Win Situation

Posted on September 28, 2012

By Neha Bhandarkar:

Sample this: A ten-year-old (Let us call him Raju!) was asked by his mother to get half a kg sugar and a packet of milk from the nearby grocery shop. Raju goes to the shop and for some reason, that day the prices of the regular milk packet have gone up by a few rupees. Raju was given the exact amount for the things that were to be bought. The grocery shop owner (let’s name him Mr. Lal) is quite known to Raju’s family. He tells the little boy to pay the remaining amount later, and hence Raju gets what his mother had asked for and gets back home.

If you imagine a similar situation where Raju is sent to a nearby Super Shoppe (say, a Reliance fresh), I don’t think I need to narrate you what is likely to happen at the end of the story!

Change comes with its set of inevitable consequences. Speaking of which all the hullabaloo that has come with the central government’s decision to allow Foreign Direct Investment in retail, whether or not the kirana shops will be shut down because of the entry of international bigwigs like Walmart, has got several arguments to it.

With liberalised trade policies being openly practised in our country, FDI will undoubtedly have an effect on the established unorganized retail sector. To elucidate, if we consider the conditions on the basis of which FDI will be allowed to launch their firms, one can actually see that there is no such threat that the kirana shops will face. Foreign retailers will be allowed to set up only in cities with a population of more than 1 million and only in states that want them. The retailers must make a minimum investment of $100 million and must source at least 30 percent of the goods from local, small industries.

One should not forget that the small scale retail shops (mom-and-pop store as they are popularly called) that are spread across in almost every nook and cranny of every available neighbourhood, allow their consumers to be a part of their business, in a way that there is a personal connection. There lies that genteel association with which you are welcomed and the baniya (owner) won’t really mind if you buy something off the list that you are carrying in your shopping bag (no you are still indebted, better pay when you visit next! ).

India is said to be a nation of shopkeepers. With almost every family from lower to upper middle class being dependant on these shops for two instead of six eggs or even 125gms of sugar and not a 1000gms of the same, these shops are ‘reachable’ because of their ready-availability and location. If you are lucky the shopkeepers or the help employed will not mind delivering a loaf of bread at your doorstep. With such benefits coming from the so called unorganised, yet convenient sector, one cannot envisage the future of the kirana shops.

The FDI effect will certainly be there, either visibly impacting or avoidably insignificant. It will again depend on the consumers who will naturally decide the validity of the same. In my opinion one shall compete with another. The existing retail shops that are available in our localities might have to spruce their existing conditions. The current super markets trend on the ‘everything under one roof’ arrangement. Also there are several attractive schemes that keep the consumers visiting these supermarkets. This becomes an advantage for a consumer as he or she need not go to various places to get what they want to buy.

My mother still considers the local shop (Shiva ki dukaan, in her words) her only supplier, despite, a number of complaining incidents. Also she doesn’t mind availing the attractive schemes that the nearby Reliance Fresh has to offer. In any case, she being the consumer finds her convenience and decides to go where she has to.

A convinced solution that should work for the supplier, retailer and the consumer is what the participation of FDI will and should decide. The solution will be possible with cooperation between these three sole entities without any meddling with the set policies. The FDI and its establishments in the retail should not exploit the already existing kirana shops. In fact, let us hope for a harmonious co-existence between the guest (Walmart and the like) and the host (Shop in Raju’s colony).

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