Late last month, Finance Minister P Chidambaram assured us that FDI in retail will eventually be allowed, and that big retail does not really drive small retailers out. That the onslaught of the foreign retailers does not necessarily mean doom for the numerous kirana stores doting Indiascape. That these mom-and-pop stores will soon learn to re-organise themselves to thrive.
The point to be noted is the clear indication that the finance minister gave about the eventual opening up of FDI in retail. “It is only a matter of time, before the policy is tweaked to allow FDI in retail,” said the minister, in distant Philadelphia. Now, the $330-billion (the size of the Indian retail market) question is, when and in what manner? Like, how much FDI is the government thinking of allowing in the retail sector?
As of now, the government allows 100 per cent FDI investment in ‘cash and carry’ and wholesale operations, and 51 per cent in single-brand retail. After waiting for FDI in front-end retail to open up, Wal-Mart has already joined hands with Bharti Enterprises in ‘cash and carry’ and backend operations. Now, other international giants are looking for Indian partners to enter the cash-and-carry segment. (Mind you, one section is even opposing FDI in this segment).
Going by what the finance minister is indicating, if the government is so positive about the future of retailing in India, as is reflected by the finance minister’s speech, then why is organised retailing facing opposition in Uttar Pradesh, West Bengal, Kerala, and elsewhere? And what is the government doing about it? Is it, once again, the chasm between central and state governments on policy issues, or is it simple populist policies with an eye on the vote bank?
Only some time back, Commerce Minister Kamal Nath had said that more than thinking about allowing FDI in retail, the government will give more importance to see that big retailers do not prove to be detrimental for the small traders. It was a clear signal to big retailers, whether domestic biggies like Reliance and Future Group, or foreign giants like Wal-Mart and Tesco, to keep their fingers crossed as far as their humungous retail expansion plans are concerned.
Organisations like Confederation of All India Traders (CAIT), which is a federation of small and medium retailers across the country, has been opposing not only FDI in retail, but also the entry of big corporate retailers, on the ground that they will displace the hundreds of thousands of kirana stores out of business. The organisation is open to debate on the issue and has communicated the same to the government on several occasions.
It seems both the government and those opposing retail are more interested in keeping the issue alive. What, after all, is stopping the government from coming out with a clear-cut policy on the issue of retail. A policy that will ensure India does not miss out on the tremendous opportunity that the retail boom in the country promises to offer. Of course, balancing the different interest groups is one of the raison d’être of any democratic government, and the interest of small retailers has to be taken care of, of course.
What the scores of retail enthusiasts in the country and eager investors abroad can do without, perhaps, is the mixed signals being given by the policymakers, who want to eat the economic cake and have the small trader vote bank too. And mind you, time is of the essence for a progressive forward-looking retail policy. After all, China is only next door away.