FDI IN RETAIL - AHOY CONSUMERISM!
By Ruma Dubey
The stocks in the spotlight today were those from the retail sector. Trent, Shoppers Stop, Provogue, Pantaloon, all were up in the green. News of FDI in multi brand retail getting a push and shove after the Presidential elections, in Congress governed states set the ball rolling. Like a yo-yo, these retail stocks have been going up and down, every time on expectations of the much awaited FDI getting the nod. And every time the news comes up, hopes are raised and when Mamataji or more like her quell the move, the stocks dip. But this time, like all other times in the past, the word is that it is sure to go through.
If one may recollect, the Cabinet had approved 51% FDI in multi brand retail in November but it did not get approval from Mamataji and hence was put in abeyance. So how would it be different this time as Mamataji is still very much there in the picture? This time, the Congress plans to play it differently. News is that it will build the case on allowing FDI in states which are not opposed to it; read that as “Congress governed states" and states which are against FDI in retail can oppose it using state laws.” Makes logical sense. Also not to forget, in terms of managing the “Opposition” today, the Congress is getting cozy with its “outside” partner – the Samajwadi Party and this could probably help keep a tight rein on TMC. It is also hopeful of support from Punjab and Odisha.
In a way, this partial allowance of FDI in multi brand retail is a good thing too. It will show whether or not it is good, in terms of employment, inflation, co-existence of kirana’s . If it proves to be good, maybe that in itself will convince the current states which are opposed to accept it too. And if it does bring in the evils which some states fear, then it is well and good that it is not being followed all across the country. The Congress governed states allowing the FDI will thus become experimental grounds.
The market is already celebrating this probability of this getting approval. Does that mean that companies will have foreign retailers knocking on their doors immediately the next day after the approval comes through? Not likely. The nod would be more psychological, making more of a perceptional difference. For us and the companies to see the changes, it will take over 6 -8 months. Infact the most awaited entrant, Wal Mart, when it entered China in 1996, expected good growth with a short time but it took more than a decade for the Chinese operations to become successful. Thus the likes of Wal Mart, Tesco, Carrefour could see become a reality in some states in India. And yes, we are sure to have visitors from other “opposing” states, coming down to shop at Wal Mart or Tesco.
We cannot fight development and live in a spaceship. The small retailers may or not be affected; we do not know. Thus to shun it without knowing is foolish. Computerisation in banks, FDI in insurance; almost each and every thing has faced opposition but today we clearly see that every water finds its own level. LIC feared that it would lose business if FDI in insurance was allowed; has that happened? Infact LIC has only grown stronger. The advantages of FD in retail, in terms of developing the infrastructure, building the much needed supply chains, direct procurement from farmers; all will lead to better development. India is too vast a country, with too many people thus fearing closure of mom-and-pop shops is being too naïve. Dubai, a city of malls has more small shops today than it did when there were lesser malls.
For the layman (in some states), what this news means is that there will be more malls, more choices, more shopping. Ahoy consumerism! This is the direction in which the world is moving today, either join it or get left behind. Can India afford to get left behind when we are already globally linked?