WALL MART VS. AGARWAL MART

•                      Role Of F.D.I (Foreign Direct Investment) in Retail Sector in India

My grandfather reminiscences a time forty years back when he worked for the Public Works Department (PWD). His office was one of the rooms in an old, rickety building off Lalbazaar Street in the heart of Old Lucknow. The shops downstairs sold clocks, umbrellas and musical instruments. On the floor above there was a plethora of shops selling garments. Instead of the canteen they had "Agarwal bhai", who supplied soft drinks, tea, cakes, biscuits and cigarettes apart from selling usual toothpaste, soap, shampoo etc. His 12 year old son would do miscellaneous errands for his father. This boy was a school-dropout. But our story does not end here! Interestingly, in spite of being an-all-thumbs in reading and writing and hardly completing a sentence in Hindi, he knew his numbers. When socially-conscious people objected to this, his father had a riposte!

His father Agarwal Bhai's joy knew no bounds because he thought that his son-instead of wasting time in useless schooling was actually learning the ropes of his Business and tricks of trade..!!!! 

That boy must now be in his 30s, and running “Agarwalmart”.

We live in a country where family values are very strong. Strong enough for the entire Agarwal clan to help the sole bread earner Aggarwal-ji to run their Kirana Store. The local Kirana Shops i.e. Agarwal-mart offers great convenience. They stock almost every household item ranging from grocery to common medicines, from plastic toys to stationary items. They take order over the phone, pack everything immaculately and deliver at doorsteps within no time. Money transition is mainly in cash but they offer great convenience of giving credits for few weeks. They know our requirements and over the years have become an integral part of our existence. The blind trust people have on the Kirana-wallahs is greater than on the outspoken sales-people of gigantic malls!!

When Manmohan Singh announced the decision to allow foreign direct investment (FDI) in multi brand retailing, it led to chaos. The global retail giants are all set to descend on desi shores. Some argue that organized retail can help to counter food inflation and bring down prices. The introduction of F.D.I is being viewed as an amendment which would lead to consumer price reduction and employment generation. According to Kishore Biyani who is the India’s largest retailer, the fact that the price offered by modern retailers is already cheaper by 3-4% than the kiranas so there is actually nothing new that the Wall mart aims at offering the Indians.

There is always a positive side of any amendment as the introduction of F.D.I is considered to be a boon for farmers. The farmers will gain in the form of better returns for their produce as retailers will look to establish direct linkages with them. Retailers would also associate themselves with activities such as soil testing for nutrient levels to capture deficiencies and mapping of agro-input requirements. Initiatives such as these will aim to increase the productivity of farms and would also leave a “Demonstration Effect” on the farmers of other regions.

Not everyone is buying arguments such as these. Accomplished retailers say that modern retailers whether local or foreign cannot make a huge and immediate impact on farmers. The real change will happen by bringing about reforms in agricultural sector. Arvind Singhal, chairman at retail consultancy Technopak Advisors says that those in favor of F.D.I in retail would probably talk of development but little do they know that the development is done by a third party and not by the retailers.

Apart from political and regulatory roadblocks a major challenge for foreign retail chains could be catering to the diverse needs of Indian Consumer which differ from state to state and religion to religion. Indian market is considered to be one of the toughest markets. India is a home to staggering 14.6 million retail outlets. Basically it is a typical small-retail-channel country and any more channels of trade will only improvise this native format. The native Kirana format has the advantage of a minimal cost structure and small space enabling. This brings them closer to their target consumer. It would be virtually impossible for large retail chains to copy the local model. Lot of opposition to F.D.I has been coming from the middlemen who bring produce from the farm to the market. These middlemen have profited from the ban on foreign investment.

The kiranas will have to face stronger competition. Experts say apprehensions have blown out of proportion as these chains would come up only in select towns. This effectively rules out the concerns about rendering people jobless. If anything, the investment will bring in more jobs. In the end, it is the consumer that stands to benefit.