THE much awaited (perceived by the policy makers) big ticket reform, that is FDI in retail has been allowed, well first on the timing of it, there are two views first that UPA was genuinely frustrated over the long delay in second generation reform process, it could not waited more so it was the right time to sail it through, when the country is gripped by all round corruption issues. Second view says that UPA needed a fresh approval at least by any class, a kind of legitimacy to continue in the office(read corporate class here) so it went for the decision.
Well the issue has came up at the time when UPA is already at back foot and quite expectedly this issue has been highly politicised, there are some genuine threats and opportunities both, but for good reasons it is improbable that this reform would be a catastrophe for the farm sector and will push our farmers at the level of destitution. The mother arguments of all type of stakeholders is that it will lead to massive reallocation , in which, supporters says middleman will be eliminated farmers will directly be accessed by the corporate, back end infrastructure will be created, inflation will go down, disparity between farm and manufacturing will reduce etc while with the same forcible logic its opponents argue that it will lead to ruining of mom and pop shops, elimination of small and marginal farmers, massive rural unemployment etc. Let's get the fact first, retailing contributes 22 percent of GDP, it earns the bread and butter for not less than 2 million household as on date, the size of retailing business is roughly 350 billion $ annually and expected to grow by 1o to 15 percent in coming decade, moreover AT Carney has ranked India as the most lucrative market third year in a row. Organised retail is just 5 to 8 percent of this market.
Now even if FDI is allowed, it will go in the highly urban areas, where not only the presence of mom and pop shops are less but also these areas already have presence of organised retailers like big bazaar, so real completion is between Indian and foreign retailers, which is good. Small retailers have their own USPs like any time offering, selling on credit, serving the individualistic demand for consumers, personal relationship etc. Apart from it there are spread in the length and breadth of 6 lakh villages’ there sheer presence can never be challenged by any Wal-Mart, because Wal-Mart is not going to serve the villages.
As far as back end is concerned, farmers are already in not so good situation, they will definitely be at better side, yes they have small farms but strategy can always be worked out for area and size specific products. New jobs will be created in back end operations. The physical infrastructure creation which will be useful for farmers is doubtful but intangible structure most likely to come.
Having said that, it cannot be forgotten that jobs will definitely be lost, major loss will be seen in urban small retailing. We are neither Canada nor Malaysia where good and bad example exist for multi brand retailing. I always believe that India is a strange country, what work as poison for others work as elixirs for this land such is the resilience and adaptability of this land. Who can forget the forced opening of Indian market back in 1991 and the wonder that happened after!
Finally, the decision has to be finally taken by states, because they will grant the permission for opening of such stores, so there is no need to panic as the new circumstances appear new lessons are learnt new strategies are drawn and this is how development takes place because we like it or not we have to face this, sooner or later, and like many things in life, in this particular case, sooner is better.
