FDI in Indian Retail & My Observations

I recently happened to go to a roadside shop in Channapatna to buy some wooden toys. The shopkeeper gave me his visiting card and told me that I can order online as well. It was a similar experience some days ago at Shringeri where a shopkeeper selling, home made food products like chips, sweets, pickles also mentioned about his online store.

On a day when we are having the Bharath Bundh against diesel price hike and FDI in retail, shopkeepers in rural and semi urban areas like Mr Yoganand http://www.indiamart.com/channapatna-toys/ or Bhatru of Shringeri are examples of changing face of the Indian retail industry. Their rich elder brothers in the industry may invest in sophisticated IT systems, management graduates, real estate and marketing but the native, average, rustic counterpart is not lagging behind.

At the outset I assume that with FDI in retail the competition may increase but the Indian consumer would still prefer to visit his neighboring Kirana store that gives him the luxury of ordering through telephone, delivery at door steps according to convenience and also the facility to get credit without having a credit card. An Indian consumer may still prefer shopping for vegetables and fruits in Gandhi Bazaar or Hopcoms over that at organized retailers because he is sure that he gets fresh produce from unorganized retailers.

Consumers may prefer organized retailer for their apparel shopping, shopping for life style products, luxury items, etc.

What needs to be seen is the impact of FDI on the producers. If the retailers decide to source their merchandise locally then the local producers would benefit from the same. Going by experiences of garment factories in Tirupur I am told that a number of them have closed down as their earlier customers now look at other Asian countries for their supplies. Cost factor could just be one of the reason for this change in sourcing. It needs to be investigated if there are other factors that led to this shift. 

I personally feel that the government should also think at introducing measures that will help local producers (farmers, manufacturers) compete with the international market and produce world class materials. Probably a clause should be introduced which makes it mandatory for retailers to source at least 60 % of the items from local producers. That way we could look at creation of more jobs and revenue with in our country than look at big MNC's to create these jobs.  

If we continue to produce high quality optimum cost products on our soil, I don't see any reason as to why we cannot further fuel ourselves as the most preferred destination for business and sourcing.  The need of the hour is to create a perfect balance between agriculture which is our main backbone and industrialization and generate revenue by making them self sustainable.