Small shop owners in India upset with foreign direct investment | Asia Pacific

Small shop owners in India upset with foreign direct investment

Small shop owners in India upset with foreign direct investment

Updated 10 December 2012, 21:57 AEDT

India's recent decision to allow foreign direct investment in the retail sector has provoked protests from political parties and millions of small shopkeepers.

The new entrants are likely to include big international operators such as the Tesco and Wal-Mart.

Correspondent: Murali Krishnan

Speakers: Mohan Kandelwal and Anil Kalra, shop owners, M K Venu, economic analyst, and Praveen Khandelwal, national Secretary General, Confederation of All India Traders

SFX: Market sounds.

KRISHNAN: Anil Kalra runs a kirana or general store in south Delhi which he inherited from his father and a business he will hand over to his sons in the future. Like many kiranas, it is a business built on a reputation for reliability of service, one earned over generations.

But he is a worried man these days after the government won a vote in parliament allowing Foreign Direct Investment or FDI in the retail sector, allowing up to 51 per cent FDI in multi-brand retail and 100 per cent FDI in single-brand retail.

The move enables global retail firms such as Wal-Mart Stores, Tesco and Carrefour to set shop with a local partner and sell directly to consumers for the first time. This could transform India's $450 billion retail market.

KALRA: Yes ( I am worried) people would go and watch the new products and would certainly buy from them. In the beginning the mini-shop keepers, the petty ones will face problems. I have a franchise of Morning Stores, I may not have much of a problem but the others who buy and sell, they can have a problem because when the Indian market catches up with Wal-Mart, they will have problems.

KRISHNAN: Mohan Khandelwal, a "mom and pop" shop owner is apprehensive. He closed his shop the day government took the decision for the entry of foreign supermarkets.

These family-owned stores occupy a central place in Indian daily life and help give the country the highest shop density in the world.


SFX: People talking..

KHANDELWAL: Business will be hit, but I hope it is not going to be bad. The small customers will still stay with me. People who want to buy in bulk will go to the supermarkets. I might retain some clientele who buy in small quantities.

KRISHNAN: Independent retailers such as "mom-and-pop" shops dominate India's retail market - holding a 93 percent market share over corporate retailers at 7 percent. The new rules will enable global retailers to sell directly to Indian consumers. Previously, multi-national retailers could only operate wholesale businesses.

The decision to allow foreign investment into retail has caused a major uproar with protests and mass rallies.

The Confederation of All India Traders (CAIT), a trade group that represents 50 million local businesses, says global giants such as Wal-Mart are not welcome in India, because their enormous resources will put local retailers out of business.

Praveen Khandelwal is the national Secretary General of this confederation.

KHANDELWAL: We have living examples of the US, Australia, New Zealand and so many other countries were these big retailers are operating their business activities, Because they have vast resources, deep pockets, there will be an uneven and unhealthy level playing field where out mom and pop shops and kirana stores will not be in a position to compete with them resulting in the closure of their shops.

KRISHNAN: But not all are convinced that better-organised foreign supermarkets will wipe out mom and pop shops.

M K Venu, an economic analyst who has studied the retail sector in detail feels they will survive and perhaps even thrive alongside supermarkets.

VENU: I think these fears are unfounded because most of these big stores, Wal-Mart, Tescos, will be outside the city limits. In the last six years a lot of Indian business has set up big retail units and they have not affected the mom and pop shops which have consistently grown in the cities and how they have grown their businesses even while the Indian businesses have spread their multi-brand chain.

KRISHNAN: But Mr. Khandelwal says FDI in multi-brand retail without adequate safeguards will lead to widespread displacement and poor treatment of Indian workers in logistics, agriculture and manufacturing.

KHANDELWAL: The global retailers operate on predatory pricing policy to wipe out competition and to enter into crony capitalism and then to monopolize the retail trade and dictate their own discretionary prices. That results in closure of shops and even the farmers, the laborers, the transporters - and other sectors of retail trade will be affected badly.

KRISHNAN: While there is likely to be some dislocation when foreign supermarkets open its India stores, the big question is whether entire segments of the Indian retail sector are likely to disappear as feared.


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