India needs to liberalize FDI in multibranded retail
by
Brian Antao, Ph.D.

India has proven to be an attractive destination for FDI,
but lags far behind China in this regard. There is great
potential for India to gain in the FDI inflows if it
liberalizes the now stringent FDI norms in the retail
sector, particularly if it allows up to 100% FDI in the
multibranded retail sector. Estimates are that India's
retail business has the potential to grow by over
$400 billion over the next 15 years. This estimated retail business
cannot be achieved unless the government immediately
liberalizes FDI across the retail sector particularly in
multibranded retail.

Let us look at the current retail scenario in India it is
largely composed of the small traders and hawkers many
pawning of their wares off street corners, many of them do
not even have a tax liability. Hygene is a major concern and
many diseases can be spread through this setup of the small
trader/hawker community. Price controls is another issue as
none exists, as these traders are at a liberty to quote what
they wish and it has become a system where one has to bargain
with them. Most importantly the concepts of Consumer satisfaction
do not exist.
 
Now step in the Organized retail, with their big establisments
well organized setups, clean and hygenic setups, good customer
service, controlled prices, no need to hassle and bargain,
they have goods return policies, Wide variety of choices, great
bargains on prices and discounts. These are heavens for the Customers,
with all the amenities.
 
The modern Organized retail are the next generation step in the future
that will help India achieve its estimates of $400 billion growth in retail
business. The current retail establishment which can best be described
as the jopadpati traders will only take the country backward.
Now we have to look at these developments at the same way as we are trying
to clear out the slum dwellers out from Mumbai and bring in High rise
developments. We may not be exactly looking to clear out the jopadpati traders
but we simply cannot afford to live in a backward era with them being our
sole service mechanism. They have to make way for the high rises that is the
Organized retail. And a solution to the small traders who may be displaced is
like what has been done in many of the developed countries, these small traders
who have the skill and experience of working with the retail business can be easily
absorbed in the Organized retail sector.
 
To the trade unions and the Leftists who are opposing the entry of the Organized
retail and FDI in the retail sector, claiming that they are protecting the
interests of the small traders, these are really short sighted. India is supposed
to be one of the world's true democracy, and in such a true democracy we expect a
free enterprise, where there has to be an equal opportunity for everyone to set up
their business, compete freely and thrive. The Organized retail is trying to make
an entry in a free enterprise and do their business, these Leftists have no right
to tell them that they cannot do business. If the small jopadpati traders feel
threatened by the entry of the Organized retail, they should be willing to compete fairly
with the organized retail, develop their own niche and continue to thrive. These
Leftists and trade unionists that oppose the Organized retail are being really
anti progressive and are not seeing that they are coming by the way of hampering
the progress and development of the country and by their actions will only keep the
country backward.

Organized retail can be in the form from Indian corporations or from MNCs through
FDI, for which the government has to open up the entire retail sector, particularly
the multibranded retail sector to 100% FDI. Opening up the multibranded retail sector
to FDI will see the entry of large retail giants such as CareFour, Kroger, HomeDepot
etc. These will provide to the Consumer many different shopping options. The government
has to see that it is the consumer that it has to satisfy first when it comes to making
policy decisions in the retail sector. Because the retail business services the consumers
and without the consumers, the retail business will crash. What the consumers demand is
better service, better choices, better options and most importantly and better retail
infrastructure. Opening the retail sector to FDI will help develop India's non-existent
retail infrastructure, such as the supply chain, distribution etc. and not to mention
the high quality employment the the FDI in retail will generate. Opening the multibranded
retail sector to FDI would also make available imports to the consumer, thereby
increasing the level of consumer satisfaction.

The most important thing lacking in India today is a world-class retail infrastructure,
and with a projected retail business growth of $400 billion in the next 15 years, the government
has to take steps to ensure that there will be a world-class retail infrastructure in
place. With our current jopadpati traders we surely cannot hope to achieve those estimates.
Only a big entry of Organized retail and liberalization of FDI in retail across all sectors,
particularly in multibranded retail will help achieve these targets.

(This article appeared in The Herald editorial section dt. 15/12/2007)