The Impending Retail Bonanza

The impending retail bonanza

 

Despite the fuss made in the Rajya Sabha on Walmart’s reported lobbying expenses, the legislative deed on FDI in multi-brand retail is indeed done. It makes the Opposition BJP and the Left look like they don’t want progress, even as the Government won the much clamoured for voting on the issue.

 The Left has always been more committed to its ideology than the demands of the economy, but the BJP’s stand is somewhat inconsistent and inexplicable. Many of the reasons advanced by its stalwarts during the parliamentary debates would most likely fail to convince their own roster of high-achieving Chief Ministers in Gujarat, Madhya Pradesh and Goa.

All three states, among the several the BJP runs with reasonable competence, are progressing much faster than their peers, because of their strong emphasis on market economics. But the BJP central leadership and possibly the less transparent ideological backdrop in the RSS et al, seem to be on their own trip.

Some senior leaders in the BJP have even made bold to say that they will scrap FDI in multi-brand retail if voted to power in 2014. This is disappointing, and hopefully just political rhetoric. Most votaries of right-off-centre economics are not generally happy with the UPA’s mostly Socialist leanings. But now they must be feeling a little orphaned.

This is definitely a modern progressive development that rightly flies in the face of the protectionist instincts of a section of both the populace and its elected representatives. But closed economies, protectionism, suppressed competition, has truly had its day.

Today, this kind of insularity and big-brother-knows-bestism is almost impossible to enforce in a relentlessly globalised world. Demand, when it exists, will be met, by hook or by crook. But this way, at least the smugglers, the grey-marketeers, the profiteering importers, will have to look at something else. And the inefficiencies in the name of the indigenous and timeless bania-bred retailing system with have to upgrade or languish.

A great deal of the kudos for some adroit cross-party management, to make this milestone possible, needs to go to Parliamentary Affairs Minister Mr. Kamal Nath.

He has pulled off not only the voting on this controversial matter in UPA’s favour in both houses, but avoided the sticky logjam that has voided the previous two sessions and piled up the unpassed bills.

Significantly, Mr. Kamal Nath has recently also initiated both the regularisation of New Delhi’s many, running into their thousands, “illegal” colonies; and also the sprawling up-market farm houses, in a pragmatic and people friendly move. A move that is non-doctrinaire for once, and moreover freely points out the unrealistic nature of several of our rules and regulations and the glaring weaknesses of our master planning for the Capital. This, while wearing his Urban Affairs hat, of course.

But the freshly minted FDI triumph, that is still mostly being viewed as a bout of skilled political footwork, has much to recommend it. Not only to the eager customers it will benefit, but also to the global investment community which has at last received a positive signal from India after a number of wilfully regressive ones.

As for the fillip that our farming and manufacturing sectors will receive, inclusive of new employment opportunities, also the advertising and marketing end of the consumer rainbow; the impact is likely to be both uplifting and transformational. It will further professionalises our game and vastly improve our choices.

There will also be tens of thousands of retail industry jobs created in the accelerated urbanisation and penetration into some 200 “A B and C” class cities and towns.  No one amongst the foreign investors is going to take the money and run back to their country. There is, truth be told, nowhere to run to. Europe and America lack unrequited demand, while ours is almost endless. There are more bangs for the buck to be had right here.

And here too, gone are the days of the four or six metro cities thought to be sophisticated enough to receive modernity, surrounded by the darkness of the rest of India. All this is changing, as the statistics on the purchases being made by rural and those 200 cities and towns of India show. It is dawning on the many pundits that the unmet demand for sophisticated and modern facilities is probably the strongest in these parts.

Walmart already knows all this. That is why it has reportedly spent US$ 25 million over the years since 2008 on professional lobbyists to try and influence, among other things, the US and Indian Governments to permit foreign investors into multi-brand retailing in India.

And this US$ 25 million is apparently not a big outlay when you look at their estimates of the size of the Indian retail market. Walmart thinks it is worth US$ 500 billion currently, and likely to rise to US$ 1 trillion by 2020!

That magic figure of US $ 1 trillion is more or less the size of the official Indian economy, all of it, at present. And it took us 65 years to arrive at, or very near it, since independence in 1947.

 So, even at present, Walmart’s take on the retail tally and the consumerism it represents, is about half of the official economy, and perhaps a quarter or 20% of the entire Indian economy, with the cash-and-carry-without-benefit-of-banking part of things included.

 Mrs. Shiela Dikshit’s Government of Delhi State has been first off the blocks in its effort to implement the FDI in multi-brand retail. Her Government’s only fear is the misstep that could brings the political hornets buzzing angrily in its wake. But carefully as it comes about, FDI in multi-brand retailing will be most welcome.

And the Prime Minister is not lagging behind in his overtures to the farmers of his ethnic home state of Punjab, to welcome the opportunities that FDI in multi-brand retail is expected to bring to them. Punjab, as usual, will not be found wanting. The State is full of progressive farmers not scared of risking their arm.

And while there is much trepidation in the hearts of some that it will swamp our farmers, middle-men, small shops etc, and ruin, through unfair pricing, our none too robust manufacturing; there is little hard data from elsewhere to support this apprehension.

How are higher wage economies to compete with us? Won’t it be much more lucrative for the foreigners to manufacture here for other markets too? How much dumping is sustainable over time? No, fear-mongering apart, we are likely to see greater choice, better prices and quality because of the open competition.  

 (1,097 words)

December 11^th, 2012
Gautam Mukherjee