In Sep, 2012, UPA II government at the centre, allowed by executive decision FDI in multibrand retail. There was a lot heated protest and principal partner of UPA II, The All India Trina Mool Congress (TMC) withdrew support from the government reducing central government to minority status.
A lot has been said about pros and con of FDI in multibrand retail. I am sure this is not the last word. In a recent article in Times of India, author Sujit John has made very well reasoned argument against FDI in multibrand retail. The author has pointed out that more and more people will be attracted to go to supermarkets, ignoring neighborhood stores. It is important to point out that India is a much more diverse and highly populated country compared to western democracies like USA, Canada, UK and Australia. Our population is 1 billion plus, which is at least 5 times bigger than that of US and at least 40 fold greater than that of Canada and Australia and may be UK. Out of 1 billion plus people, may 100 – 200 million Indians have purchasing power, making it comparable to US population and still bigger than Canada, Australia and UK. This population with purchasing power may go have the means to go to supermarkets, which will be outside the city and definitely not in towns with less than 10 lac people. Remaining 900 million people may not have means to go to the supermarkets or they may not have means to shop there. A point to remember, many people go to swanky malls, but majority still do their shopping from small markets where things are less expensive.
Another point to consider that shopping habbits of Indians are very different from that of westerners. Many Indians do not do shopping a week or month’s supply of grocery. Even if we want to do, we may not have storage place or electricity to run freezers. On top of this, neighborhood kirana stores offer interest free credit, offer free home delivery and as the author himself suggested offer human touch. So many people will still shop at these neighborhood stores, take this number to be close to 500 – 900 million.
This argument sounds disingenuos.The author suggests that food grain and fruits that are lost between farm to freezer is similar between US and India. The author quotes statistics of McKinsey for India and Natural Resources Defence Committe for US. However, it is not clear if the methodology of loss calculation between US and India were similar or not. It is also a fact that every year we hear how food grains are lost because of lack of storage space. We hear fruits rot because farmers do not have storage space. Farmers have to sell fruits and vegetables cheap to middlemen/wholesale dealer, who in turn sell these at retail market at manifold high price. to It is argued that super market chains will develop link with farmers and give them reasonable price, setup cold storage and build connectivity. At the same time shoppers will get a cheap fruit and vegetable.
It is important to note that several multibrand retail stores are in operation in Punjab. Besides, several Indian origin multibrand retail shops like Reliance Fresh, Subhiksha, Shoppers Stop, Big Bazaar etc are operational in several states. Many stores are not doing well despite a deep pocket. This could be considered a positive benefit to neighborhood stores. It can be argued that many Indian stores will sell out to foreigners, with much more deep pockets. However, as argues earlier, many Indians will still shop at local neighborhood stores.