Indian Economy: News and Discussion (Jan 1 2010)

[shyam]

The retailer - which connects a producer to the consumers - is the most critical link in the production-consumption chain. You can produce as much as you want, or you can consume as much as you like, but a powerful retailer has the power to decide how those two should be connected. This is also the reason why global powers always take extreme steps to control global trade and not production or consumption. Giving that critical part to a foreign player with huge muscle is akin to giving your balls to somebody for massaging. Initially he may massage so that you feel great, but later if he decides to squeeze, you have no choice but yield to his demands.

[Dileep]

Well, here in midlands, the store chains are doing good (except the screwup of Varkeys, which is their own doing). I would always prefer the refrigerator stored fresh looking vegs from Reliance to the wilted ones riding the truck from TN at the shop. Of course, both will be trumped by the local, fresh ones sold from the heap at the market. I have a bit of knowledge of the vegetable logistics chain that extends from the interior TN to the shop in DMA. The farmer gets 2 for the tomato. I pay 20, from which the shop guy gets 1, all for the furadan tasting wilted ones. I get great looking, non-furadan tasting ones from Reliance for 18. I welcome big retail onlee.

The change in the attitude of the shops need to be seen to be believed, because of the store chains who always give a discount over MRP. Reliance already have a huge logistics setup, cutting the middlemen. Initially they did not have local vegs, but now they do. I believe they have a local operation that does the purchase and distribution.

[abhischekcc]

Abhijeet,

WM first decimates competition by low prices. Once others retailers have left an area, WM uses its freedom to price to the hilt. In areas where competition exists, they do not have pricing power.

I will track down where I read this and post it later.

[rohitvats]

I think all this talk of Walmart decimating local retailers is nothing but fear mongering. Also, people are trying to apply the foreign model in Indian context.

There are two cases in point -

(a) Metro Cash and Carry in Bengalore - While the Metro is supposed to be a C&C format, everyone and his aunt knows that people, who can afford the pass/id card, go and shop there. One can see a huge line of cars and SUV in the parking area stocked to brim with stuff. And people do come from far and wide. There are two of these stores in Bengalore - have they run out the local Kirana stores?

Also, in terms of good stored by them - apart from exotic cheese and other canned meats, everything else in Indian consumer specific product and sourced from local manufacturers. From Maggi to soaps to toothbrush to Adidas to everything. So, why the fear of Wal Mart or anything else?

BTW - Walmart is coming into India with Bharti as Bharti Walmart.

(b) Local Retail Chains - how is a local Reliance fresh/More/Star Bazaar different from a local Kirana stores perspective? These fellows also represent the Walmart model - albiet on a far smaller scale.

IMO, the hub and spoke model represented by Bharti-Walmart and local stores like Reliance Fresh/XYz have their own place in the Indian context. The fear of WM running out local stores is not based on strong fundamentals....the purchasing power of Reliance or More operating 100s of small store vis a vis HUL is same as a stores operated by Bhart-Walmart across the country

[abhischekcc]

I am not doing fear mongering as big box format is unlikely to run the small retailers out of business. I have witnessed it first hand in the area I live in. It was barren to begin with, then got one big bazaar. Everybody thought that the small retailers were toast. Lo behold, they have been growing like mushrooms and there are hardly any empty shops left. And the big box formats have increased from 1 to over 10 in the catchment area. Specialised retailers (electronics, etc) are too many to be counted.
Big box cannot compete with small retailers when it comes to convenience of shopping (close to home and small purchase size), and the pricing differential is not much. The pie is large enough for everybody.

[krishnan]

Dunno about wall mart , but the grocery store we have been shopping with for past 15 years gives stuff at cheap rates for us

[Abhijeet]

The same old tired arguments have been repeatedly used to delay foreign competition in India since 1991:

- Deep-pocketed foreign companies will come in and drive Indian companies out of business. Then they will jack up prices on all of us. The East India Company all over again!

- They will put millions of people out of work with their newfangled technology. We prefer paying people to dig a hole in the ground and then fill it up again. It generates employment!

- They will simply copy-paste their operating models from abroad in India. India as we all know is a delicate flower and things that have worked well in other countries for decades will simply not do here. We need our own solutions.

None of these arguments has ever been proven true. Indian companies have thrived and prospered in the post-liberalization world. A good kick of international-level competition on their backsides did them good. There has been no mass unemployment. And foreign companies have localized with a vengeance, often applying lessons learnt in India to their operations elsewhere.

There is no alternative to improving the average productivity of the Indian worker, and the Indian economy. That is the only way for India to grow rich.

As an Indian consumer, I want the most modern techniques used to provide me with international-quality products at good prices.

- I'm tired of paying dollar-denominated prices for large categories of products, imported from Thailand or Indonesia by some hole-in-the-wall outfit because large international retailers cannot sell them here.
- I'm tired of a shopping experience that consists of trying to get the attention of the bored salesman behind the counter and asking him to show me items stacked high up on a shelf. Sometimes these items cannot even be opened unless you commit to buying them.
- I'm tired of having no option to return products -- even defective pieces. You bought it, it's your problem.
- I'm tired of the complete opacity involved in buying even basic products in India. No online stores, no user reviews, no comparative pricing. Most retailers want to keep it that way. The less information consumers have about a product, the more power they have.

The Indian consumer deserves better than this.

The least we can do is to accept small retailers for the inefficient segments of the economy they are, rather than defend them as somehow better than organized retail.

[Theo_Fidel]

The least we can do is to accept small retailers for the inefficient segments of the economy they are, rather than defend them as somehow better than organized retail.

+1.

I would add another. They are not wealth creators. Just middlemen demanding a cut. I would suspect well over half have no business experience and are nonviable. Just a way to give give 'Deva' who wasn't interested in school something to do.

In other news..

http://www.domain-b.com/economy/agricul ... mates.html

India's kharif foodgrain production seen at 114.6 million tonnes news


That should give us a total grain production of 280 Million tons or so. In per capita terms this works out to about 250 kg per person. Yet statistics show this at 170 kg per person. In real terms it should be even higher than 250 as very young children tend to be on a liquid diet.

Why the discrepancy.

Also..

Zing! Take that you Panda lurks.

http://www.channelnewsasia.com/stories/ ... 90/1/.html

India growth rate to outpace China by 2013: Morgan Stanley

The securities firm said India's GDP growth will likely accelerate to an average 9-10 per cent in the next 10 years.

Meanwhile, Morgan Stanley expects China's economy to growth at an average 8 per cent rate in the same period.

Morgan Stanley sees the country's working-age population growing by 17 per cent over the next 10 years. This compares with by 2 per cent growth in China.

"The second factor is that India has been catching up on reforms, and we think the pace of reforms is picking up. The reforms are important because you can have working-age population, but you need the platform for that working-age population and that's where India is now doing... particularly in increasing the infrastructure spending," said Chetan Ahya, MD, Asia Pacific Economist, Morgan Stanley.

Spending on infrastructure is seen growing to US$200 billion by 2013, versus just US$20 billion in 2003.

As a result, the rate of investment to GDP may rise from 35 per cent last year to around 37 per cent in 2011.

[Rahul Mehta]

India's kharif foodgrain production seen at 114.6 million tonnes news. That should give us a total grain production of 280 Million tons or so. In per capita terms this works out to about 250 kg per person. Yet statistics show this at 170 kg per person. In real terms it should be even higher than 250 as very young children tend to be on a liquid diet.

IIRC, so called per capita availability of grains =
(production - exports + imports - wastage - animal_feed - net_addition_in_buffer_stock) .

The wastage is estimate, as exact wastage cant be known. Animal feed includes grains fed for milk, eggs, chicken and meat. Animal feed is some ground data followed by good guesss work rather than any exact numbers. Now % grains going to animals has increased in past 2 decades which can be seen from the fact that middle class and above have much eating more milk, butter, cheese (compare pizza\sandwich consumption of 2010 and 1990), ghee (compare sweet consumption of 2010 and 1990), eggs, meat, chicken etc. 1 kg of meat need 10 kg of grain, 1 kg of eggs needs 5 kg of grains and 1 kg of milk needs 2 kg of grains, 1kg of ghee needs 10 kg of milk i.e. 20 kg of grains. So as more and more grain goes for milk, cheese, eggs, chicken and meat ---- less grain is available for direct consumption by humans. eg if meat consumption increases by 1 kg, and grain production increases by less than 10kg, somebody's grain consumption will decrease. So sadak chhaap people (like myself) believe that one reason -- why per capita consumption of grain and pulses in bottom half of the population is decreasing -- is that upper middle class and middle class is eating much more milk, eggs, cheese, meat, chicken and so more grains goes to animals and so prices increase. And so poor have less grains to eat. Experts dont agree with us sadak chhaap people. They give reasons beyond my comprehension, and so I wont discuss them.

[Theo_Fidel]

So sadak chhaap people (like myself) believe that one reason -- why per capita consumption of grain and pulses in bottom half of the population is decreasing -- is that upper middle class and middle class is eating much more milk, eggs, cheese, meat, chicken and so more grains goes to animals and so prices increase. And so poor have less grains to eat. Experts dont agree with us sadak chhaap people. They give reasons beyond my comprehension, and so I wont discuss them.

RM, You are hilarious. Even if I don't agree with you.

I thought we were rolling in excess grain. How come. If anything our yields are so abysmal that we could easily grow 3-4 times the grain we do right now. Imagine the surplus problems we would have then! Yet the market is clearly signaling there is too much grain here. What gives.

Anyone other than RM..

[paramu]

There is no alternative to improving the average productivity of the Indian worker, and the Indian economy. That is the only way for India to grow rich.

While I agree with you that productivity increase will make people rich, could you please explain how India can create employment for people who lost jobs due to productivity increase, without running a ponzi scheme? We hear this in US that people who lost jobs due to automation or outsourcing of production and services should improve their skills and find better jobs. But the reality is that people just can't find other jobs. What is the solution you see?

I link it to the situation in US because India may face the same problems after one or two generations if we follow the exact path US took, with current young population becoming equivalent of baby boomers.

[vic]

In Delhi NCR, another massive housing bubble is in making. Some properties are now double the peak of 2008.

[amit]

There is no alternative to improving the average productivity of the Indian worker, and the Indian economy. That is the only way for India to grow rich.

While I agree with you that productivity increase will make people rich, could you please explain how India can create employment for people who lost jobs due to productivity increase, without running a ponzi scheme? We hear this in US that people who lost jobs due to automation or outsourcing of production and services should improve their skills and find better jobs. But the reality is that people just can't find other jobs. What is the solution you see?

I link it to the situation in US because India may face the same problems after one or two generations if we follow the exact path US took, with current young population becoming equivalent of baby boomers.

Paramu,

I'm sure Abhijeet will give you a response but if I may chip in, I think you need to look at the amount of slack (that is future growth potential) in the Indian economy vis a vis the US economy.

Productivity increases in one sector will mean well paid jobs for employees in that sector. And the spending pattern of these employees will have a cascading effect on other sectors. You need to understand that productivity increases usually occur sector by sector at different paces.

Moreover, due to the nascent growth potential in the Indian economy due to the huge (potential) internal demand, any particular sector will grow in size as well as in terms of better productivity. Take a look at the automobile/automotive sector. There have been huge productivity gains but at the same time the industry has been growing so fast that the total number of people employed have also gone up dramatically.

And because of better efficiencies more people are getting better salaries which again is having a cascading effect on other sectors, which are also going through the same cycle.

Till such time the Indian economy becomes a mature, stagnating economy, productivity increases IMO will result in increase in employment not a decrease.

JMT

[vic]

People who lament failuer of Pvt Sector to innovate in license raj arena have ZERO understanding of the restrictions. During hey day of license raj, the Babu controlled the input, output, type and capacity of machinery, the nation of import and sometimes even the companies with which you can enter into JV plus income tax was around 105% (yes no typo)

Hmm! I'll bite.

So what exactly is preventing them from beating the world right now. They are still around right.

How come SAIL is not the lowest cost or highest quality producer in India. How about ONGC, etc.

Because the side effects and after effects of Babudom are going away slowly now.

[Theo_Fidel]

Because the side effects and after effects of Babudom are going away slowly now.

I'll call BS on that one. I've actually been to the HM factory here in Chennai. Trust me that bunch is not beating anyone. A bunch of random welders could get together and build better stuff. And the sleepy attitude of most of the people there (I hesitate to call them workers) guarantees failure. You could take that bunch and put them in Mahindra world city and they would fail spectacularly. Remember the Ambani's created their empire in the license Raj. To be honest the HM guys are just waiting for their government pension and death. Compare that to the Royal Enfield guys who are creating newer and better products that actually sell in their little niche, that now covers the world. I have seen Royal Enfield Motor cycles in the US for instance.

The really odd thing is that there are small sections of babudom that are world class. The ISRO for instance, There is no difference between their practices and NASA for instance. The Powergrid Corporation is another one. Maruti is essentially all Indian, though now privatized. Ennore power plant is another one I've personally visited and been impressed with. Madras port trust despite a militant union of 20,000 jobless dock workers has reduced turn around time for containers to 32 hours or so. Their plan is to get it to 20 hours in 3 years. For comparison Singapore has a turn around time of 18 hours. I could go on.

[Abhijeet]

While I agree with you that productivity increase will make people rich, could you please explain how India can create employment for people who lost jobs due to productivity increase, without running a ponzi scheme?

There is no Ponzi scheme. The Industrial Revolution proceeded for 300 years along this exact path without needing one. Machines came in and replaced human workers. One machine could do the work of twenty men, and the same value could be produced by far fewer people than before. But the average person -- in all countries where the Industrial Revolution has actually been allowed to play out -- has attained a standard of living never before seen in human civilization.

I think the recent global economic crisis needs to be seen in perspective. All it's telling us is that if a country is generating $100 in value per year, it can't indefinitely spend $110 per year. Don't live beyond your means. It says nothing about allowing people to do low-value-added jobs indefinitely because they can't do anything else.

So what will the displaced workers do? For the foreseeable future, in India at least, they will find other jobs, if they are only given some training (therein lies some of the rub, given the state of our governance). There is so much that needs to be done, new markets and industries being created, that I don't believe there will be a shortage of work for people who have some skills.

What about the point when everything can be done by machines, or by poorer people in some other country? Even if there is such a thing, I think India is decades away from that point, certainly too far away to worry about now.

We need to get past the 19th century in terms of economic development first, before we start worrying about the 21st century problems of developed countries.

[Ameet]

India has above ground gold stocks worth $800 billion: WGC

http://economictimes.indiatimes.com/mar ... 903514.cms

India owns over 18,000 tonnes of above ground gold stocks worth approximately $ 800 billion and representing at least 11 per cent of global stock, according to estimates of World Gold Council.

In 2009, total Indian gold demand reached $ 19 billion, or Rs 974 billion, which accounts for 15 per cent of the global gold market, according to WGC.

Over the past ten years, the value of gold demand in India has increased at an average rate of 13 per cent per year, outpacing the country's real GDP , inflation and population growth by six per cent, eight per cent and 12 per cent respectively.

The country currently has one of the highest saving rates in the world, estimated at around 30 per cent of total income, of which 10 per cent is already invested in gold.

[SwamyG]

India must protect its retail sector. Powerful retailors have the power to squeeze both vendors/suppliers and customers over a period of time.

Can you provide any examples from across the world where powerful retailers have squeezed customers? A reasonable level of competition is all that's needed to prevent this. Not hundreds of thousands of small, uneducated shopkeepers who would be better off -- and happier -- working as a salesperson in a retail chain.

Small retailers in India are some of the poorest at inventory management and customer service that I've seen anywhere ("No refund no exchange", "goods once sold will not be taken back" etc).

What evidence exists that large organized retailers will NOT use their investments in technology and economies of scale to improve the lives of Indian consumers?

One cannot jump to that conclusion. These hundreds of thousands of small uneducated shopkeepers employ easily at least two people. There is no kirana or annachi stores without couple of youth running around. And these shops provide a counter balance to the consolidation of the organized sector.

Organized retailers will provide benefits no doubt, when in the troubled times they will fly off because they can. It is not that the unorganized sector are entirely altruistic and won't ditch, it is just that they cannot. And because of being unorganized and not in a chain model; their impact one each other is unlike the impact of say a chain store shutting down its shops or pulling a particular product from its stores.

Putting all eggs in one basket is calling for disaster. So is the case for trusting organized retail sector.

[RamaY]

Small retailers in India are some of the poorest at inventory management and customer service that I've seen anywhere ("No refund no exchange", "goods once sold will not be taken back" etc).

Indian market has to evolve much before this can be tried by even the large retailers in India.

A structural approach to IT, infrastructure, logistics management can bring the necessary efficiencies to unorganized retail sector too. This should Indian story instead of mortgaging the retail sector to MNCs.

[krisna]

Key facts about India's gold industry

India's centuries-old gold industry is the world's biggest market for the metal, with imports meeting almost all the country's requirements for jewellery and investment.

India in 2009 faced its weakest year since gold trade was freed up in 1997. Record high prices and a failed monsoon cut imports by 33 percent from the previous year to 480 tonnes, against an annual range between 600 and 800 tonnes in the previous five years.

Per capita gold consumption is only 0.7 grams, half that of the United States and one-third of the Middle East, according to World Gold Council (WGC) estimates.
- India's gold market is estimated to have more than 300,000 jewellers, mostly small, family-run businesses, a WGC study showed.
- Only 23 banks and some private and government trading agencies have licences to import gold because of its implications for foreign exchange flows.

In urban areas, gold faces competition from diamonds as incomes have risen, but the higher purchasing power of the lower and middle income sections of the population has brought new customers into the market.

[krisna]

India will shoot up to the eighth place in the Board of the International Monetary Fund once the G-20 countries approve the quota reforms that have already been proposed

While the decision was taken by the IMF two years ago, the approval by the G-20 Finance Ministers last month in South Korea has added significantly to its merit and the decision at the highest political level in the G-20 will amount to a "seal of approval" that can be implemented thereon.

[krisna]

China Amps Up to Compete in India

New Delhi is buckling down to deal with India's need for electricity. In its upcoming five-year plan from 2012-17, India is expected to aim for 100 gigawatts in new generating capacity, compared to current installed capacity of 165 gigawatts. That involves spending billions of dollars.

This is clearest in the deal, announced late last month, in which Reliance Power agreed to buy some $10 billion in clean-burning coal-fired generation capacity from Shanghai Electric Company. This overshadows the $2.5 billion deal GE signed during President Obama's trip to sell Reliance gas-fired generators. It's about equal to the total $10 billion in all product lines that GE hopes to sell in India in coming years.

Two challenges the Chinese face should offer some solace to Western companies.

First is the burden of China's overcapacity. From afar it looks like an advantage. Companies are willing to sell generation equipment at lower prices than their peers simply to keep the overbuilt Chinese assembly lines humming. And they can deliver quickly. Overcapacity of cash means Chinese banks, such as the four that are financing the Reliance-Shanghai Electric deal, are able to offer favorable terms.

Second is the peril of leaving an environment where you enjoy the unquestioned forbearance of your regulators.

[shyam]

I think the recent global economic crisis needs to be seen in perspective. All it's telling us is that if a country is generating $100 in value per year, it can't indefinitely spend $110 per year. Don't live beyond your means. It says nothing about allowing people to do low-value-added jobs indefinitely because they can't do anything else.

This is what makes it a ponzi scheme that was running on credit. The moment people were not able to take more credit to support the system, it started collapsing. Without this credit based expansion, probably, western capitalism would have lost to soviet communism.

Industrial revolution also must be taken in perspective. What made it possible was colonization of rest of the world by western powers. That is, the finance for industrial revolution came by looting rest of the world.

When we use colonial era incidents to show how things had worked, we should also understand that there was a huge population in the world who were exploited to support that development. Even after WWII, it worked through currency manipulation where rest of the world was willing to sell their resources to countries with reserve currencies. Countries that owned reserve currencies still had the freedom to print them at very low risk, where as other countries did not.

We need to look at and prepare for a world where India doesn't have these capabilities, nor should India exploit others if it gets the capability for that, and still sustainable for its entire population. It will be too selfish if current generation just takes care of its own problems and leaves it to the next generation to address problems that arises out of these actions. We can see that in massa where current generation took a lot of public debt leaving next generation to pay it back, which I believe was not a correct thing to do.

[Abhijeet]

This is going OT, so I'll answer briefly and leave it at that.

I think it's a stretch to say that the Industrial Revolution everywhere was funded by colonial looting. For example, where were the South Korean colonies during their development? Were Sweden's small colonies in the 19th century, or Japan's colonies (if any) during the Meiji Restoration, sufficient to fund their industrial development?

The result of loose monetary policies over the last 20 years should not cast doubt on the whole process of industrialization and mechanization that has led to a manifold increase in living standards since the 18th century (and it has been going on for just over 200 years, not 300 as I said in my previous post).

As an aside, I wish people who live in the US would stop trying to superimpose their daily experience onto the Indian reality. In terms of industrial development India is probably where the US was around the middle of 19th century. It will be decades before any of the problems that the West is facing (which, again, were caused by irresponsible spending and loose money, not due to something fundamentally wrong with industrialization) come to India. Please stop worrying about it.

[shyam]

South Korean colonies during their development?

South Korea grew when it started exporting to US, and US paid back in its currency. The key requirement for any country to grow after WWII is to hook to USD.

Were Sweden's small colonies in the 19th century, or Japan's colonies (if any) during the Meiji Restoration, sufficient to fund their industrial development?

Either you own colonies or trade with countries that own colonies.

In terms of industrial development India is probably where the US was around the middle of 19th century. It will be decades before any of the problems

India is not US. US developed when it exported heavily to Europe that enjoyed colonies in different parts of world. India doesn't have that luxury. Given the future of world economy, it can't export massively to pull its entire population out of poverty. So, the ways in which job creation happened in US during its development need not happen in India.

I'm not opposed to modernisation or automation, but I don't support the obsession with super optimization, or always looking for ways to increase productivitiy and profit. I think we need to understand that there are some strategically important business sectors and India must protect them. I consider retail to be one of them.

[Vipul]

India can handle capital inflows even up to $75 billion: Montek.

[SwamyG]

As an aside, I wish people who live in the US would stop trying to superimpose their daily experience onto the Indian reality

Flip side is people see the flaws and mistakes a country made, and wonder why India has to follow the same path to make the same mistakes. Isn't it wise to learn from others' mistakes too?

[Theo_Fidel]

I'm not opposed to modernisation or automation, but I don't support the obsession with super optimization, or always looking for ways to increase productivitiy and profit. I think we need to understand that there are some strategically important business sectors and India must protect them. I consider retail to be one of them.

Shyam,

This was pretty much the argument all the way from Independence to the 90's. Very old hat. Very failed. Very doomed. This was what we said about every thing from car production to potato chips.

Is there a place for protecting small uneconomic activities when they aim for excellence. Research, Athletics, Transportation, even retirement, etc. Absolutely.

There is no point in parking a bunch of semi-literates in glorified tea kaddai's just to give them something to do.

All this does is guarantee poverty. So the question to ask is do you want poverty reduction or poverty preservation? I would also add that this is a perfect way to squander our one time demographic dividend.

[amit]

I would also add that this is a perfect way to squander our one time demographic dividend.

That's the elephant in the room nobody wants to talk about in India and even on BRF.

Our demographic dividend cusp is very narrow and every year we miss a 10 per cent or thereabouts growth makes things even more worse.

Remember there is something worse than a huge poor country with a young population (something India still is despite all the growth over the past few years). And that is a huge poor country with an aging population. I wouldn't want my children or the children of my fellow Indians to live is such a country.

For all the problems that Europe, the US and Japan face today, we must remember that they grew rich before they grew old (that is they took full advantage, by whatever means, of their demographic dividend). China, mainly due to its one-child policy, is likely to grow old before becoming a rich country (in terms of individual wealth of its citizens) despite growing at around 10 per cent for more than two decades.

Given that we can imagine what kind of window India has. So sorry to say all this talk about opening this sector while protecting that sector is all bull.

Every sector that has been opened up to competition thus far has emerged much stronger, internationally competitive and more importantly employs more people at better salaries.

To expect that this won't happen in retail is incorrect to put it very mildly. Sure there will be some disruption, course corrections and some people will get hurt but overall millions would benefit; the farmers would get better prices, hundreds of thousands of young people would get decent jobs - folks whose educational qualifications exclude them from Itivity and other glamorous jobs.

Plus as a side effect our creaky distribution network would get fixed - more cold storages, more air-conditioned delivery trucks etc. The present fragmented retail based on kiranas is not going to pay for that.

And yes big retail doesn't mean the kiranas would get wiped out, that's just political fear mongering. I think a good example to look at is the Mom and Pop shops in Japan. Anyone who's been there would have seen that these flourish despite the presence of big retail. There's no reason to believe the same wouldn't happen in India. The people who would get hurt is the middlemen the Sabzi Mandi Thekedar types who decide what prices a poor farmer will get. I don't see why we have to shed tears for them.

JMT

[Singha]

in the last 6 yrs in blr, before my own eyes I have seen 1000s of young people find jobs in the new organized retail sector...most from lower income families in blr or from other parts of the country. lots of jobs get created once a large shop comes up - security, sales, warehouse, transport, managers, handymen, repair crew, HVAC guy....the idea that all these 1000s of people would open kirana shops is not realistic. maybe once they work for 10 yrs and save some money, many will depart and start some small business, which will create further jobs, but they need a good start with benefits ...and org retail is one way of giving that. unlike the kirana owner who will not hire staff to keep costs low and hand over business to son, org retail scales up much faster.

america is the worst example to cite for the demise of mom and pop shops to big retail. once the american suburbia happened the catchment area of small shops was lost , and big highways, cheap cars, cheap petrol meant people could drive 15 miles for weekly shopping....such a thing is not there in any other country of the world. in every indian town and city, the hinterland of any kirana shop in a lane spans 1000s of people...in american 1000s of people would be spread across an area of many sq km in suburbia across multiple small towns.

[harbans]

Good posts Amit, Theo and Singhaji. This keeping sectors like retail 'guarded' as some strategic space to be protected is completely bogus. I remember heated arguments in the 80's i had with friends who wanted protectionism. They've all gone quiet now. But i heard the same stale arguments from them. The SDRE cannot compete with the TFTA and we will be slaves and are inferior.

Allowing organized retail to compete will create tens of millions of jobs. Give millions an understanding of how the chain works. Leading to better streamlining and indeed better quality of support jobs as demand for folks with inventory management, Electricians, Ref engineers and that's in addition to reducing hoarding, assured farmer incomes etc. I doubt that Kirana stores will do badly too. This bogey is being raised to gain a voting constituency by pretending there's going to be some sea change.

[Prem]

http://www.techdirt.com/articles/201011 ... ring.shtml

India The Latest To Think About Kicking People Off The Internet Based On Accusations Of File Sharing
from the guilty-until-proven-innocent dept
A few months back, we pointed to a discussion looking at how three countries with some of the biggest movie industries outside of the US -- Nigeria, China and India -- all were thriving, despite massive "piracy." As you looked at the details of each, it showed how each industry had been adapting to a marketplace in which some of the content was widely available, but were still figuring out ways to make money (i.e., you can compete with free). However, because competing with free actually involves work, it should come as no surprise that some are seeking to implement government protectionist policies.
Gautam John points us to the news that a "High Level Committee on Piracy" in India, put together by the Indian government has come back with a variety of suggestions including a "three strikes" plan that would kick users off the internet based on accusations (not convictions) for unauthorized file sharing. There's also a suggestion that would appear to make theater owners somewhat liable for customers camcording movies. They also support preventative detention of potential pirates -- a ridiculous idea that has been put in practice in some areas of India already -- and which the US entertainment industry has encouraged. Yes, this is detaining people who might make an unauthorized copy. Welcome to pre-crime, India-style. About the only suggestion that isn't massively damaging to individuals' rights is the idea that filmmakers "make piracy unviable" by offering their movies at more reasonable prices and in more ways, so that people are more willing to go with legitimate options. They probably should have just stuck with that suggestion and left the rest alone.

[SwamyG]

the idea that all these 1000s of people would open kirana shops is not realistic. maybe once they work for 10 yrs and save some money, many will depart and start some small business, which will create further jobs, but they need a good start with benefits ...and org retail is one way of giving that. unlike the kirana owner who will not hire staff to keep costs low and hand over business to son, org retail scales up much faster.

They scale up faster, and come down faster. By virtue of being connected that is a possibility; and when discussing issues why look only at the positive side?

[krisna]

Microfinance: What's wrong with it

The poster boy of microfinance is now seeking some anonymity. In Andhra Pradesh, the epicentre of the worst crisis faced by microfinance in India, SKS Microfinance is playing down its identity and going into preservation mode. At its modest office in a residential colony in Warangal district, India’s largest microfinance company has taken down its board. At its head office in upmarket Begumpet in Hyderabad, it hung a cloth mesh in front of its plush, six-storey glass building, ostensibly to protect it from the public ire over suicides. It’s a bad time to be a microfinance institution (MFI).

Crisis points--
1) banks
2) MFI
3) credit culture
4) Labour slow down
5) Politics

[Vasu]

By going in for one of the most successful IPO's in bourses history, SKS already had a lot of attention on it whether it liked it or not. The way it removed Suresh Gurumani brought even more unwanted attention to the company, which these silly acts won't cover.

Microfinance, the way it was formed in the initial stages by Mohd. Yunus and others, had a huge social aspect to it. They lent to the poorest of the poor, without collateral, for periods as short as two weeks, and on generous payment options. Despite the high risk, the NPA's of most of these institutions match, or even better, the NPA's of some of the best run banks.

Now you bring the investor in, and the equation changes automatically. Now there are margins to take care of, profit to be shown, and losses to be reduced. This is where I find the biggest conflict to be. I believe that in such a situation, the risk appetite of a microfinance institution should decrease automatically, thus reducing the range of impoverished individuals they can provide loans to. In fact, some may even start collecting some collateral if they can. With the high interest rates prevalent in the industry, then what differentiates them from the much-maligned money lender of yore?

I have friends in the industry, and i've been told that the only reason Suresh Gurumani was shuttled out was because of the huge ego clash between him and Vikram Akula. I mean, Gurumani is almost singlehandedly responsible for running their IPO show. At the same time, he is in a bitter tussle with his former wife Malini, who co-founded the company with him. My point is that any industry when it reaches critical mass attracts regulation, and microfinance is no different. The fact that its in the news now for all the wrong reasons has brought about that need for regulation even faster.

[amit]

the idea that all these 1000s of people would open kirana shops is not realistic. maybe once they work for 10 yrs and save some money, many will depart and start some small business, which will create further jobs, but they need a good start with benefits ...and org retail is one way of giving that. unlike the kirana owner who will not hire staff to keep costs low and hand over business to son, org retail scales up much faster.

They scale up faster, and come down faster. By virtue of being connected that is a possibility; and when discussing issues why look only at the positive side?

Actually it would be nice if someone can list the negatives of organised retail with coherent examples.

I should add a caveat here. My support for organised retail does not necessarily mean I'm advocating welcoming Wal Mart with open arms to India. But I think local Indian plays should be given full scope and opportunity to expand at a rapid rate. There shouldn't be roadblocks like there were a few years ago to Reliance.

One other point. I think the fears about Wal Mart in the Indian context is grossly exaggerated. If you look at Wal Mart's international operations, they have not been anywhere as successful outside the US as they have been within. And I think much of the success can be atributed to the points raised by Singha about the peculiarities of the US market.

[Vasu]

Good points Amit. In fact, I have rarely seen, if at all, the Indian media talk about Wal Mart's successes, or rather lack of them, abroad. India in general is not a bulk buying nation. after all, we pioneered the satchet concept, and look how popular that is. FMCG products are being offered in smaller quantities than before.

Cadburys Bourneville, their dark chocolate offering, comes with the tagline that you have to earn it to eat it. It came in a large size only, and apparently nobody could earn it. So they reduced the size, brought out a smaller pack, and changed the tagline that you still have to earn it! Ah, the games marketers play. This is why I wanted to be a marketing man when in college

I feel The only thing that will attract Indians to Wal Mart is its brand. Its all-American, its world famous, and gels perfectly well with the love for global (especially American) brands among the upworldly mobile Indian urban family.

Indian companies have been encouraged to enter the organized retail sector, and they have been doing very well. If Wal Mart, Carrefor, or anybody else for that matter were to enter India, they would probably look like just another Pantaloons or Shoppers Stop. Most of the mom-and-pop stores we talk about do not sell what is sold in these large-format stores. I think the fear of many of our compatriots on this end is unwarranted.

The thorny issue lies in sales of perishable goods. Reliance Fresh faced protests, Subhiksha's already shut down, but there's still plenty of Indian retailers into the business of selling fruits and vegetables (such as More, from Aditya Birla group). Will a Wal Mart enter this segment? This is an issue that I haven't been able to form an opinion on because I haven't come across any analysis in this regard.

[sanjeevpunj]

Most Indian Marts today are over-crowded (eg: Big Bazaar in GIP, NOIDA) and lack of space is killing the visitors.Bulk buying by families is gradually increasing.Last week we got 12 packs of 1 Ltrs Nestle Milk,which has a decent 2 month shelf life.Yet I hate to go to Big Bazaar as it is always so crowded, and half the counters display "CLOSED" signboards.

If WallMart offers a huge shopping space, and many counters (all working) and decent discounts, it would surely thrive.
The problem is that in India these Big Supermarts are included within a shopping complex that has a lot of other shops. Dedicated structures like Carrefour and Walmart would definitely create an identity for themselves,large parking lots,huge shopping floors, massive billing counter arrays, making things less crowded.

[Theo_Fidel]

I can say that the PYT eye candy at the local Big Bazaar/Reliance Fresh in their smart uniforms was very distracting. Very negative to my single minded focus on prices.

[vera_k]

In fact, the retailer that would thrive in India is Amazon.com. Transaction cost for them will be hugely helped due to India's high population density. Plus there are no Walmarts in dense urban environments, so India will be a new experience for that type of store, while Amazon has no such limitations. But yeah, all the visitors from India I've hosted recently have wanted to go to the local Walmart - even the people worth millions of $s. Not sure why it has such brand awareness.