FDI in retail not a threat to kirana shops: Montek

Last Updated 23 September 2012, 11:25 IST

Allaying fears that opening up of the retail sector for FDI will hurt small kirana shops, Plan Panel Deputy Chairman Montek Singh Ahluwalia today said modern retail is an expanding segment and it would more than double in a very short time.

"I don't think FDI in retail is threat to small retailers. Modern retail is the expanding segment. Those who say that the small sector would be hurt, I think they are wrong by the way," Ahluwalia said in a CNN-IBN TV programme Devil's Advocate.

Asked that the much-hyped reform was once opposed by Prime Minister Manmohan Singh as then Leader of the Opposition in Rajya Sabha in 2002, Ahluwalia said, "I don't recall what was said by every person on every day. Things move forward, perceptions change, circumstances change. I don't think that there is any lack of clarity on FDI in retail. BJP was at that time pro-reform."

When asked about the impact of FDI in retail in Thailand where 67 per cent of the kirana shops had to be closed down. he said, "Look it is based on some studies I am not familiar with. Central point that we should make is, in a growing economy, if we have to achieve our objective of 8 per cent (economic) growth, in that kind of growth scenario total size of retail market is going to be more than double in a very short time."

Lauding the government's decision to notify FDI in retail, Ahluwalia said, "This is a structural change. I don't believe modern retail can expand fast enough to raise real wages. What happened in Thailand is not a predictor, what will happen here. In the next 20 to 30 years, do you want small retailers to have same share what it is today. I think it is completely wrong. This is like saying when taxis were introduced the share of tangas (horse cart) went down, one could bring them back, no."

When asked what would be the impact on retail which is the second biggest employer in India with 44 million jobs, he said, "I think it is complete misreading because you need to look at, do you want modernisation of retail sector or not. If you want modernisation of retail sector, you want a upward pressure on quality of employment, modern retail produces better quality of jobs."

"My point is fewer jobs, if labour growth is going down to one per cent and GDP is growing at 8 or 9 per cent. Jobs would be created in many different sectors. Please look at studies on what is the quality of jobs in traditional retail," Ahluwalia said.

"The quality of those jobs is very low. Young people with education who were joining the
labour force will be quite happy in working for modern retail than being employed at traditional retail," he said.

On the apprehensions that WalMart presence could have a devastating effect on small retailers as per a UNI Global study, Ahluwalia said, "I am not talking about WalMart. It is an individual company. I think the circumstances are completely different and the reason for that is in the US, it is very easy for someone to increase its share hugely by following a particular pricing policy."

"The consumer in US is geared to rush to hyper markets, buying for a week buying for a month. That won't happen in India. Indian case is one where modern retail has 6 per cent of total retail market share. It would be an extra ordinary achievement if they double that in a five to eight years. We are least penetrated by the modern retail".

About Indian economist Jayati Ghosh's estimate that one WalMart store would replace 1,400 small retailers at the cost of 5,000 jobs, he said, "The notion of modern retail, it may involve much higher labour productivity at the front end but at the back of that it is entire new supply chain system where jobs are being created not in selling physically to people but in upgrading the supply. Unless you take that in account this comparison are meaningless."

About BJP leader Arun Jaitely's concerns that foreign players will capitalise on India's high-cost manufacturing base, Ahluwalia said, "What he is talking about, is its impact. Tell him to go to Lok Nayak Bhawan, where there are a lot small retailers every one of which talking about Chinese goods".

He added, "The notion that the foreign retailers are going to be faster to import at importing than our own modern retailer or small retailier... We have huge tendency to import. Today, Indian modern retail has no compulsion to do domestic sourcing. If there is FDI, they will be compelled to do significant amount of domestic sourcing."

On the law against predatory pricing, Ahluwalia said, "You want to go to India consumer, and say I am going to have a law that prevents a retailer from lowering the price at a time when Indian consumer is saying do everything that lowers the price. I mean this is just non-sense."

(Published 23 September 2012, 11:25 IST)

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