Yet another budget has come and gone, and once again the retail industry has been left high and dry, with a new set of wounds to lick over. With the Economic Survey having come out strongly in favor of allowing FDI in multi-brand retail( yeah, I do read such reports), there was a genuine air of expectation amongst members of the retailing fraternity. However, with the subject not even finding a mention in the finance minister’s budget speech, all hopes have come crashing down with a thud, leaving all of us desperately in search of the proverbial silver lining amidst the dark clouds hovering over the future of multi-brand retail in the country.
The case for allowing FDI is too well known to bear repetition any more. I myself have been a consistent votary of the many charms of modern day retail, having written in agonizing detail in these very pages of the many beneficial effects such a move could have on the entire ecosystem of Indian retail. Besides the obvious benefits of bringing in much needed back-end technology to Indian shores, it would also benefit the farmer and the end consumer alike by cutting down the role of the middle players, who, not surprisingly, have been the most vociferous opponents of such a move. Furthermore, with the retail sector expected to double over the next 7 years on the back of sustained economic growth of 9% , the job opportunities created for India’s ever rising labor force by the retail industry is something no one can realistically ignore-after all, as a young job seeker, working for a Wal-Mart presumably offers better career prospects than the adjacent Shyamlal Jee ki dukan, however nice Shyamlal Jee may actually be.
Sadly, with no let-up from the kirana store lobby, it appears that global retail giants will just have to bide their time to get a share of the Indian retail pie with no clear timeline set for letting them in anytime soon. And adding salt to their festering wounds is a recent report from global consultancy firm PWC, putting forth in no uncertain terms just what it is that they are missing out on. As per the report, India’s retail sector is expected to grow to about USD 900 billion by 2014, on the back of rising disposable incomes, expansion of stores and supporting economic factors that are expected to turn more and more Indians with cash to spare into guzzling shopaholics, desperately searching for new avenues to blow away their hard earned money in. Against such a background, it comes as no surprise that most of the global retail majors such as Wal-Mart, Tesco, Carrefour, Metro and Spar have already set up shop in India in alliance with local partners, albeit in the cash-and-carry segment and can be counted on to come rushing in once the floodgates are indeed opened.
To be sure, you have got to give the govt some credit for trying to do a fairly difficult balancing job in which it has found itself between a rock and a hard place on more than one occasion. With the small-merchant lobby doing its best of raising the spectre of millions of small shopkeepers losing their livelihoods, allowing FDI in retail would be a difficult proposition for any govt, regardless of party affiliation. Given the political hot potato this subject can be, it won’t be a bad idea for the Wal-Marts of the world to follow through on the advice recently offered by Trade Minister Anand Sharma , who asked global retailers to show some patience, and consider putting in place warehousing and cold storage facilities before setting up shop full scale in the Indian market. After all, the Indian retail market will only get more lucrative going ahead, whether it’s 2011 or 2013, and preparing the groundwork would not only help in the long run but might also earn some much needed goodwill from vital stakeholders in the entire debate.
If there is indeed any silver lining in the entire matter, it has to be that for all intents and purposes, it is quite clear that the current wisdom prevailing in the corridors of power at North Block is in favour of going ahead and opening up the retail sector, given the promise of billions of dollars worth of FDI such a move holds. As for when it actually happens, well, you might want to ask Mr. Shyamlal down the street.