It has been more than two years since Rajendra Kumar downed the shutters of his 100-square feet provision store in the bustling Ajmal Khan area of Delhi. Kumar blames the Big Bazaar store at Rajouri Garden for this, as it takes a mere 10 minutes on the Delhi Metro Rail for residents of Ajmal Khan and adjoining Karol Bagh to reach Rajouri Garden and the Big Bazaar therein.
Satyendra Kumar (name changed) starts his day sifting the fruit boxes of apples, plum and mangoes at wholesale fruits and vegetable mandi at Amritsar. As a consolidator for the retail giant Walmart, Kumar’s job is to ensure that he gets the best quality produce which would be sold at the retailer’s cash & carry outlet — Best Price Modern Wholesale at Amritsar.
Rajendra Kumar and Satyendra Kumar, perhaps, reflect the two arguments offered in favour and against opening up foreign direct investment (FDI) in retail in India.
The UPA government, possibly galvanised into action by surging protests of policy paralysis, on Thursday allowed foreign direct investment (FDI) in multi-brand retail with a 51% ceiling, brushing aside stiff opposition from political rivals and allies.
Prime Minister Manmohan Singh presided over a two-hour cabinet discussion on allowing FDI in multi-brand retail before giving the go-ahead to the proposal with a slew conditions ending months of hectic political confabulation. This has paved the way for global retailers such as Walmart, Carrefour, Tesco and others to set up large deep discount stores in India — one of the world’s hottest growth economies.
Corporate India, expectedly, cheered the move terming it as a “game changer” that will reduce wastage, bring down costs and create millions of jobs. Modern retail business focuses on maximising customer footfalls and capturing rising volume and share of the customer wallet. There are four drivers of modern retail’s “one-stop shopping model”: price, product, service, and ambience, or so the argument goes.
Indian retailers had long prepared for a policy change and analysts expect a slew of investment announcements in the coming months, even though mega store in the neighbourhood might still be a long distance away.
Kishore Biyani-promoted Future Group has readied plans to sale stake to foreign investors in several formats.
eZone — its electronic retailing vertical could be first off the block, with discussions in advance stage with a suitor and the company is awaiting the final policy push. “All our formats are FDI ready and we are in discussions,” Biyani told Hindustan Times.
Sanjiv Goenka-promoted Spencers is also learnt to be in talks with foreign retailers to sell stakes.
World’s largest retailer Walmart is widely expected to announce a front-end retail tie-up with Bharti Enterprises, with whom it already has a wholesale cash-and-carry joint venture.
“Both of us are partners of choice. We will have to discuss and finalise details on how carry the partnership forward,” Rajan Bharti Mittal, vice chairman & managing director, Bharti Enterprises told HT.
Rise in farmers’ income?
Those who argue in favour believe it will result in significant increase in farm income.
“Farmers realise a third of the total price paid by the final consumer as against 2/3rd with higher degree of retail. A World Bank Study says the average price a farmer receives for horticulture produce is barely 12 to 15% of what is paid at the retail outlet,” said commerce and industry minister Anand Sharma.
But critics have a different view.
“The decision smacks of the unflinching love of the government towards the domestic corporate and MNCs. It can be termed as a bail out package for the domestic corporate houses,” said Praveen Khandelwal, secretary general of Confederation of All India Traders, which has called for a Bharat Bandh on December 1 to protest against the decision.