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The big shop and the little shop

 | September 21, 2012

The latest paranoia in India pertains to foreign direct investment (FDI) in retail.


Often India thrives on drama and exaggeration. Sometimes, these border on hysteria.

When Internet first appeared in the country, and quickly penetrated just about every nook and corner, it was widely felt that the broadband and Wi-Fi access in one’s computer will kill newspapers and magazines. Nothing like that happened.

The latest paranoia pertains to foreign direct investment (FDI) in retail.

Prime Minister Manmohan Singh, after a three-year inertia – when he was accused of heading a non-performing coalition government in New Delhi that was also scandalously corrupt – woke up the other day and announced a slew of economic reforms, including FDI.

Many more reforms are coming, and these could be in insurance, direct taxes and so on.

The FDI in retail, which allows 51% foreign participation, has created a storm in political circles.

One of the key partners in Manmohan’s Congress-led coalition, Trinamool Congress, headed by Mamata Banerjee (who also happens to be the chief minister of the state of West Bengal), has walked out of the alliance.

Manmohan’s administration has now been reduced to a minority government.

If the government falls, it will be a pity. For the FDI is hardly an issue to be bickering about and perturbed over.

Will the arrival in India of giant chains like Wal-Mart and Tesco kill the neighbourhood shop? Hardly likely.

To begin with, 600 million farmers (in a nation where thousands of them have been killing themselves because of drought and debt) and 1,200 million potential customers will benefit, because the foreign retail chains will supply quality food at competitive prices. There will hardly be any wastage, because of world-class refrigeration. All these have been proven.

And, if someone were to imagine that Wal-Mart and Tesco, among others, will spell doom for the shop round the corner of the street you live, he is mistaken. The little shop and the big shop will live together in perfect harmony.

For one, the Indian consumer will always rely on the little shop with its personalised service and attendants for his little needs. You run out of eggs just before you sit down for breakfast, a phone call to the neighbourhood shop is enough to get the boy rushing to your door with the stuff. Wal-Mart is not going to indulge you this way.

Remember those days when KFC and McDonalds came to India? Political parties cried foul and warned that the little eatery would die. They said the local cuisine would disappear.

Sorry, but Mr Politician was wrong.

South Indian fast food like idly, dosai and vadai has not vanished. Rather, they have grown more popular, and have invaded newer areas, far, far away from where these dishes originated. They are now available in Paris, in Amsterdam. In Malaysia, in Singapore and in China!

The Indian cuisine certainly gave its foreign counterpart a run for its money. McDonalds was so desperate to get to the Indian taste bud that it thought up of McAloo Tikki.

Much like McDonalds and KFC who found that it was no walkover as far as India was concerned, foreign retailer chains would not be able to destroy the local shop, which specialises in personalised attention. The little boy in the shop will carry your grocery bag to your car. And the shop owner may well give the poor labourer a credit.

Will a Wal-Mart/Tesco do this?

So, let the foreign retail chains come in. For all you know, they may do more good than harm. Certainly, we would get better products at cheaper rates, and with the demise of the middleman, which the FDI hopes to achieve, the farmer may end up getting better returns.

Gautaman Bhaskaran is a Chennai-India based author, columnist and film critic, and can be contacted atgautamanbhaskaran@yahoo.in. He is an FMT columnist.


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