FDI in India: Retailers, farmers face uncertain future

AP Dec 1, 2011, 12.25pm IST Tags:

Tata's Westside| Reliance's Fresh

MUMBAI: Ashok Kokane sits amid his strawberries at Mumbai's Crawford Market, a handwritten ledger across his knees and a fan of dirty 10 rupee notes at his hand. The lazy, dustencrusted ceiling fans above are far past cleaning. There is a sense of timelessness here, in the lurking cats, the shiny shrine to the fearsome Hindu goddess Durga and the cry "Porter? Porter?" sent up by skinny boys with frayed baskets on their heads. It is a tableau many fear will disappear after the government's decision last week to give foreign big box retailers like Wal-Mart greater access to India's huge market. Ads by Google

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"When big man comes, small man goes," Kokane said. The arrival of modern retailing would hasten a cultural transformation in the way Indians shop and work. The debate now raging - which has shut down Parliament - hinges on competing visions of what foreign retailers will mean to agriculture and retail, India's two largest sources of jobs. The government argues organized retail will make food cheaper, liberate millions from medieval working conditions and put more money into the hands of desperate farmers. Others say it will deepen the inequities of Indian society and wipe out a merchant class whose values and skills have been passed from father to son for generations. The existing retail landscape is an intricate tangle of shops and bazaars, forged by ideas that date back to India's earliest religious texts. But, even without Wal-Mart, small, family run shops are already under threat. With the fraying of caste ties, which often determine a family's profession, and the growing dreams of India's youth for better paid, more prestigious jobs, retailers are finding it hard to keep the next generation in the family business.

"You have different sets of people who, because of the caste system, have been involved in the same business for many generations," said Arvind Singhal, founder of Technopak Advisors, a New Delhi based consulting company. These days, he said, "A shopkeeper's son may not be a shopkeeper." Today, organized retail accounts for just 5.5 per cent of India's $470 billion retail market, according to Technopak. Food accounts for about 70 per cent of the retail market, which Technopak expects will hit $675 billion by 2016. Existing domestic supermarkets, like Reliance's Fresh, Godrej's Nature's Basket and Tata's Westside, have struggled to succeed. Some sell, at exorbitant prices, rotten dairy goods, pasta infested with bugs and icy $12 pints of Haagen Dazs, repeatedly thawed and refrozen. Stocking irregularities mean those last cans of Italian plum tomatoes might not be replaced for a month. Shoppers sometimes put back items because the clerk can't figure out how to get his computer to register the bar code. "The traditional retailer in India can offer better value than some of the large, organized players," Singhal said. The best local shops are marvels of service and quality, bundled with a nice human touch. If you're short money, you can pay next time. If you want a fistful of flat-leafed parsley or a special pan, they can get it in a day or two. Every organized urban household has a raft of phone numbers for home delivery of cat food, toilet paper, chickens and pretty much anything else. Yet there are severe drawbacks to the system. India's market and roadside stalls employ, at backbreaking rates, armies of slim men pedaling rusted bicycles stacked improbably high with eggs for delivery. They run up dark staircases offering fresh rolls wrapped in newspaper and carry cases of bottled water on their heads two and three at a time. Ads by Google

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"No one benefits from this kind of employment," Singhal said. "People are hardly getting money for those jobs." Far better - and cheaper for the retailer, he argues - to hire one well-trained, decently paid person than five low paid workers and spur a virtuous cycle of rising productivity and increased consumption.

Many argue that retailing in India is not yet a zero-sum game: Demand is growing fast enough that big and small players can thrive side by side. The Ministry of Commerce noted that in China, more than 600 hypermarkets opened between 1996 and 2001 but the number of small stores grew too: from 1.9 million to over 2.5 million. The ministry predicts modernization will create some 10 million new jobs in areas like food processing and transport, as well as in the new retail outlets. They say the more open policy will drive down skyrocketing food prices and help millions of farmers get more money for their crops by eliminating waste and middlemen. Others say the changes will hurt small farmers at the backbone of India's rural economy, pushing more of them off the land with few tools to forge a better life elsewhere. P. Sainath, who has been writing about rural India for 18 years, believes big retail won't heal the inequities of rural India which have driven over 250,000 farmers to kill themselves since 1995. If anything, he said, it will make them worse.