The Indian government is today a minority. It's one major ally short of a simple majority in parliament. Two years into it's term, it didn't take any huge scandal or crisis to make this happen, though there were no shortage of both, but just allowing FDI in organized retail. How the times have changed.
True, retail is an indispensable part of civil society and accounts for 11% of our GDP but it has never been a part of any five year plan or government scheme. With 95% in the unorganised sector, retail has been growing happily without any government intervention. If there is demand, whatever it might be for, there will be someone ready to sell it for a profit. Retail as an institution is easily far older than governments themselves.
When big Indian corporations came out with organized retail chains, there were but whimpers of protests. When full FDI was allowed in the back end, it barely made the papers. Why now this hue and cry against foreign investment.
Let us consider the various stakeholders involved one by one, the farmer, the shopkeeper, the retail employee, the customer, the country and the politician. Let us try to remove the hype created by the media and other political instruments and concentrate purely on the normal man's understanding of what is going on around him.
The common small farmer lives in a very micro level society. Tell any farmer in India about any government initiative and his initial questioning will be limited to four basic questions. Will I lose my land? Will I get more money for my produce? Will I get loans easily? Will I be able to work less? A positive answer to these questions and the farmer and family are happy. FDI as such will not be able to bring any change that Indian retailers haven't had the opportunity to provide. The farmer really doesn't care if it's an Indian or a foreign company. Why should he?
The shopkeepers are the ones the media portray as the biggest losers. But are they themselves so worried? A normal kirana owner has the pulse of his customers. He has with him the best of CRM techniques in person to person interaction which no large retailer can compete with. He understands that his share of the pie is large and growing enough to sustain him. While the big players cater to the top 20-25 percent of the income pyramid, he is the owner of rest of it. While his customers might grow up to visit the nearest Big Bazaar, there are enough growing up from below to sustain his shop. McDonalds hasn't exactly destroyed the local tikki-waala has it. Growing congestion and rising real estate prices have already taken the rich metro customers out of his reach. It's again the politician and the trade unions that are doing his worrying for him.
The employee is happy. The unemployment is growing and the job market is not keeping pace. Any new job opportunities are welcomed with open arms. The country has too many young skilled and semi-skilled laborers to sustain everyday. Foreign players are looked upon as saviors providing better pay and better working conditions. But considering the track record of major retailers like WalMart, they may be in for a shock. Under more liberal labor laws, retailers are notorious in the west for their treatment of employees. Expecting them to do any better here would be foolish.
The customer is ecstatic. Rising competition and rising assortments can only lead to cheaper products and more variety. The monthly grocery purchase now entails more than one option while products all over the world are available through multiple channels. Retailers are beginning to get more customers centric and customer satisfaction and retention are the new buzzwords. Foreign retailers used to serving highly demanding customers will surely bring something new to the table. The customer will remain the king.
The country really needs the confidence of investors. Terrible fiscal management and growing infrastructure needs has left the economy in dire need of foreign capital. FDI will increase FIIs boosting up the stock market as well as bringing much needed investment in infrastructure. More competition and efficient practices might drive down inflation giving the RBI more freedom to control our growing current account deficit. As the Kelkar report has put so explicitly, growth is no longer an achievement, it is a necessity our country needs to not collapse on the weight of its growing population. FDI across the board in all sectors previously protected is the need of the hour. We have a huge market. Now is the time to leverage it to fulfill the potential our country holds.
Last and unfortunately not the least are our politicians, the policy makers. The ones supporting FDI as well as the ones opposing it seem to have similar reasons and similar arguments. In the game of politics it is easy to take a stand or raise one's swords on issues whose gestation periods are long and the benefits or losses immeasurable. Thus corruption or price hikes get sidetracked as they might fall prey to immediate action which no politician wants. FDI will be seen as a boon or a bane depending on which side of parliament you sit while larger issues can be swept under the carpet across the board. Sufficient loopholes have been kept for manipulations and the numbers game in parliament has got a safe issue to hedge its bets on. What else do politicians want.
Thus neither is FDI in retail going to usher in any golden age in the country nor will it cause any catastrophic collapse. But as long as it makes economic sense, it could benefit the population. Whatever be the end result, the politicians rest smug in the knowledge that the Indian will move on and survive come what may.
