I am not just against FDI in retail, I am against all Walmart type retail - huge retail spaces, selling products from all categories of products, having branches all over the place.
Sourcing from somethings I posted earlier [
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As far as retail is concerned, I am of the opinion that big retail chains which sell everything should be completely discouraged in the Indian market, even those from India. We should leave some space in the Indian market for the small man, the small businessman to make a living. So a WalMart would not stand a chance in India.
The impact is small, because organized retail still has not taken over the system. From what I see in Germany, here except for the a few foreign owned chains who have been able to make a niche for themselves, especially because they sell exotic foods not otherwise found in Germany from Far East, Turkey, etc.; or other small shops who sell virtual junk at throwaway prices; it is very difficult for small retailers to really survive. There is only so much demand for personal care services, gastronomy, etc. a society can create.
Somebody can't just start hawking some products on the way side, or having small shops and hope they will get sold. The big chains control everything.
So when the economy is going good, people have jobs. But whenever the economy falters, and people start becoming jobless, there is practically no work outside the organized sector where they can do something and make a living. The social safety net jumps in, but for developed countries, that are now losing increasing manufacturing and even services share to the emerging economies, and cannot keep up with the rising health costs, social security costs, etc. it is a really bad omen, if there is no unorganized sector protected from huge businesses with deep pockets.
In India, the unorganized and protected sectors keeps our millions from drowning. It is good if in some sector of the economy there are only small players and the sector can support millions of self-employed players. In our modern information-society, industrial-society, the only two sectors I can think of is agriculture and retail. Too many players involved in agriculture would mean small land-holdings, higher production costs, and thus inflation at the stage of primary industries. I would rather have competitive primary and secondary industries in India. So the only place left for the population to go in times of weak economy when the organized sector cannot take in more workers, more employees is some sector that provides self-employment and shows a steady demand is retail. Of course one can find self-employment in services as well, but all that is limited, as the service providers are all well-established and entrenched. Also in many services, the skill-set needed would be quite specialized, and the unskilled would not be able to cope with that. In retail, one needs the least skill-set.
I am no economics expert, but it just makes common sense.
First a little about what I prefer. I would like to see malls, shopping streets, corner shops selling their wares. Those kiranas on the corner, the mom&pop shops as one calls them in the States, they will of course be selling all types of stuff. But those shops which happen to be in the malls or in the shopping streets should concentrate only on one thing - women's wear, men's wear, perfumeries, dairy, fish, meat, fruits & vegetables, processed foods, Indian confectionery, namkeen, bakery, drugstore, telecommunications shop, electronics, household appliances, carpets, furniture, etc.
Here I am talking about how it used to be even before industrialization. Everybody used to sell one thing. Only this time the shopkeepers will not be selling their own produce, but what they buy from others. The specialization would also bring down costs.
Some are of the opinion that retail must necessarily also control the logistics as the distribution is inefficient. I think one of the best distribution models is the post. The distributors companies can handle the volume. In fact there can be several distributor companies working at various levels of distribution. The logistics industry can be kept separate. If we want to really learn from the outside world, then it is the area of logistics, and not retail.
Another great model I see is car-sharing. Shopkeepers who buy similar products from one type in a given region can buy together bringing down the procurement costs due to buying in bulk. Many such networks of shopkeepers can come up.
The interface between the shopkeeper and the end-customer should however remain in the hands of the small shopkeeper.
By turning over the whole retail market to the WalMarts where one can buy everything from a pin to a car, we would not be solving the problem but creating a new one. We will be throwing the baby with the bathwater.
The baby is the retail market. The bath water being the inefficiency of our procurement and distribution networks.
Some say that when the organized retail take over, the kiranas can look for a different profession. That is exactly my point. Then one has taken away the last profession he can self-employ himself in when nobody is willing to employ him as the lean times come.
Just look what a vast population we have. And when automation and mechanization and computerization is taking over the primary and secondary industries, or when the service providers would have already established themselves and when people start getting laid off, with their limited skill-set they would have nowhere else to go.
Efficiency can bring down the supply-side inflation, but for that we don't have to take away the last refuge of the poor man.
Probably because India is still so much in the beginning of its retail evolution, that India does not realize the downsides of a fully-developed organized retail market. It is unprecedented joblessness.
My claim is that as long as agriculture, mining, construction, cargo-handling, etc. are not heavily mechanized as one sees in the developed world, these industries can take in the jobless. When they get automated to increase efficiency, bring down costs even, then there wouldn't really be any industry left to suck up all the labor in lean times. All I said was, retail should remain one such industry to cushion the impact of joblessness in other areas. Of course the mantra is always, we need to create more industry, retrain labor, make them more skilled, etc. but the growth can just as well be jobless growth.
Some point to the example with the growth of banking. Well the example is not really valid, because it is not a question of losing workers due to more computerization. An industry can grow, as banking did and create more jobs, where employees can do something else. It is about losing out on self-employment opportunities. Banking as such was not one such industry. Retail is.
I am not talking about joblessness as such, but about loss of self-employment in an industry. When lean times come, some industry needs to be able to support all those who become unemployed, or the state has to put the unemployed on the dole! So what is it going to be? One reserved industry or Dole? Where is the income security going to come from?
People want to escape from this choice, by simply saying there are not going to be any lean times. In the developed world, one sees that that is not true. There can be lean times.
The "experts" are failing to address the need for an industry which retains some extra capacity for employment at short notice, when the general economy is in recession.
The example is that when one has some reserves, a piggy-bank, money that is to be used only when the times are hard, perhaps when one loses one's job. Then one needs money and one taps into that reserve. Same case with a country. Another example is that of having a reserve army when war breaks out. Then one needs soldiers, and one can tap into this pool.
Where are the "job reserves" for an economy going to be when one needs to tap into it for jobs?
What developed countries do in such a situation is, they increase public sector funding and start public infrastructure projects using huge Stimulus packages. To some extent it is to kick-start the economy, but more importantly it is to rope in the galloping unemployment rate. Often that is insufficient. Simply because at a time when the focus is on job creation, the industry that gets the money is still tuned to efficiency, and as such employers would not wish to hire so many. So there is mostly jobless growth. If the country, already has an unenviable public debt, such stimulus packages do not really help.
In such a situation of recession, the best thing would be if some industry could suck up the unemployed providing them with work, without any government intervention. As companies are not too keen on taking on workers during this time, the preference should be for self-employment. Moreover, such an industry should not have high demands on the skill-set of the workers, and a basic skill-set should suffice.
Either the state can save itself the burden of stimulus packages, or even if the government decides to intervene, it can fashion the stimulus package more towards the need of encouraging new industries, like green energy, etc. rather than in areas which contribute little to productivity but only to job creation.
As such it is important that there is always a large industry with extra capacity for self-employment generation.
By throwing the retail industry in the lap of organized retail, the state would lose its last chance for having a cushion in times of recession.
So instead of following the model of the various developed countries who have a very poor economic model for the lean times, India should instead opt for a model which caters to both the good and the bad times.
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