The opening up of FDI in multi retail has led to widespread confrontation with the government and is being fuelled by opposition parties most of whom seem to have at last got a common ground to agitate. But is FDI really so threatening in nature as to wipe out the Indian retailers out of business? Can Indian kirana shops give competition to Wal Mart?
The truth is that the fear does seem to be highly over exaggerated by a vested opposition. In reality it is estimated that the Indian retail will grow to a gigantic size of over $1.3 trillion or$1300 billion by 2020. At today's exchange rate of $1=Rs 55 it works out to Rs 71,50,000 crore. Today only about 5% of retail trade is in the organised sector.
It is furthur estimated that there are app. 50 million kirana stores in the country and app. 220 million people are dependent on it for their livelihood. These mom and pop stores operate out of 300-400 square feet shops and are extremely widespread throughout the length and breadth of every big and small city in the country. They are near to their customers and offer personal services which large super stores like WalMart cannot offer. They also offer credit to many customers and give home delivery. These may look small but ask the customers who avail of these services and they'll swear by them.
Big super storeslike Big Bazaar, More, D'Mart, Hyper City etc,are already existing in most of big Indian cities. They have not resulted in kirana shops closing down. If they had, there would have been a huge hue and cry. Also none of the opposition parties even in Kolkatta have brought forward closed kirana shop owners in their protests.
Thetruth of the matter is that the market for organised and unorganised retail is growing. The PM in his TV address to the nation said that the kirana shops in last twenty years have tripled in their numbers. This in spite of big Indian retailers opening huge shopping malls in all major cities.
As India continues to develop its retail trade will also become more and more organised. This is inevitable. However simultaneously kirana stores will also grow to meet the needs of a growing population. There will always be plenty of local and loyal customers to sustain the well spread out small retail shops. After all who wants to visit a far off huge shopping mall to buy small daily needs for which one has to first overcome parking hurdles and then stand in queues to make payment, when a mere phone call to the local friendly kirana shop will get it delivered at your home in no time.
Let the FDI come in and if it is seen to affect the kirana shops sdversely the government can always stop furthur FDI in retail. What is the big fuss? The local kirana shops can give healthy competition to Wal Mart and it is the latter who has to worry about recovering huge investments, not the former. If one looks around one will not fail to note, that in each city at least a few large organised retailelr's have closed their shops in the last few years not the local kiranas.