Listening to some of the political comments which were orchestrated after the proposal to allow FDI in Indian retail system remind one of similar kind of sound bytes heard during the early decades of independence on the issue of encouraging large industries vis-a-vis the SMEs. To day whether one likes it or not large industrial monopolies have established themselves firmly in the business landscape of the country. Have the SMEs disappeared because of this development? A realty check will reveal that both large industries and small ones are co-existing without much of catharses. What has happened is that consumers are benefited immensely by the vast expansion of the product basket and dramatic improvement of product quality. Organized sector of food business whether in fruit processing or bakery sector, has not been able to even capture 50% of the market! Probably there is a synergistic development where product promotion by the big players gives sufficient space for smaller players to carve out a significant share, the latter's advantage being lower consumer price for their products. Similarly it is doubtful whether small retailer will ever disappear from the Indian landscape because of establishment hi-tech, glittering and air conditioned supermarkets operated by transnational companies. It is interesting to watch the performance of political parties on this issue.
"Along with price rise, unemployment has been increasing in this country. 50 per cent of our population, comprising of small traders, street-vendors and the self-employed sustain themselves through retail businesses. The UPA government wants to deprive them of livelihood by allowing FDI in multi-brand retail," BJP spokesperson Shahnawaz Hussain said. BJP will oppose this policy through which the government proposes to allow 100 per cent FDI in multi-brand retail in cities having population above 10 Lakh. The party has always counted on the support of small traders and feels that neighbourhood store-owners would be adversely affected by the entry of foreign brands like Walmart, Tesco and Carrefour. "The government should try to build a political consensus on this issue. The Rajya Sabha Standing Committee report had stated that FDI should not be allowed in retail as small shopkeepers would be affected," Mr. Hussain said. He alluded to this step being taken under foreign pressure, and mentioned the recent visit of US Secretary of State Hillary Clinton to India in this regard. "There is a suspicion that this government is working under pressure. Whenever some big leader, especially from the U.S., visits India the government forms a bigger committee to over-rule the decision of its Standing Committees," he said. A Committee of Secretaries, headed by Cabinet Secretary Ajit Seth, has cleared the proposal to have FDI in retail.
The experience so far indicates that organized retail has not made any dent so far in spite of the vast investments made by organized retailing giants within the country. According to estimates the retail business in the organized sector is hardly 4-5% and if FDI is allowed in this sector the scenario is not going to change much. The so called unorganized retailers are not going to stay quiet as being seen these days when many of them have modernized their outlets with scientific stock management and reduced loose vending. Added to this it is not realized that no transnational retailing organization will venture into rural areas with indifferent infrastructure, limited income, rampant illiteracy and it is here more than 70% of the country's population eke out a living. Besides Indian traders are no easy push over with their uncanny knack for business opportunities and they will remain a force o reckon with even under the worst scenario.
