So retails happened.....

Have a very Walmart morning, fellow Indians. The great bastion of India's socialist past that has been under assault from western retailers for so many years has finally fallen. India has opened up multi-format retail to foreign players.

Walmarts, Carrefours and Tesco's of the world are smacking their lips at finally getting a chance to sell to the discerning Indian buyer. According to the Head of the India-US Business Forum (the Americans must have felt a great sense of satisfaction considering they've lead the assault for years), d

"The singular act of opening the multi-brand retail sector to foreign direct investment will significantly benefit the Indian consumer by spurring the modernization of India's vast agri-retail marketplace," said Ron Somers, the President of the US India Business Council.

"Investments will now flow into India's farm-to-market supply chain, which will usher in expertise and bring efficiencies to India's supply chain infrastructure. Food price rise and inflation will now effectively be tamed," he said.

"Opening the retail sector will create a larger market opportunity for Indian farmers, increasing quality and choice for India's sophisticated consumers," Somers said.

Unfortunately, this western enthusiasm really makes me uneasy even if FDI in retail may be a good thing for the country, because there is still no consensus on the issue at all. So is it good for the poor Indian farmer or not?

According to Arun Jaitley, and this is probably the official explanation of the BJP as well,

"The services sector accounts for 58% of country's GDP. The retail chains in India, both small and big, account for a major segment of the services sector," Jaitley said. "FDI with deep pockets entering this segment will have an adverse impact on our domestic retail sector…"

Jaitley insisted that "fragmented markets" gave more choice to consumers than "consolidated" ones, adding that once they eliminate competition through predatory pricing, large global retain chains create monopolies.

While it is true that 51% FDI is now allowed in multi-format retail and India will soon see lots of Walmarts and Carrefours and umm, Harrods maybe, and Aldi's, and some other American chains such as Target and maybe even the likes of Lord & Taylor and Saks Fifth Avenue, I am curious to know how it will de-fragment the market. As far as I know, its up to the Indian consumer how de-fragmented they want their market to be, but at the same time, it is also true that they will go to a place with the cheapest goods, and if that happens to be Evil Walmart (couldn't resist that), then that's where they will go.

According to the big Walmart, this is the "first important step", and just thinking about that makes me shudder. First step to what?!? Its just like the sinister feeling I get when I think of that Coca Cola executive who once said that he wants to replace every traditional drink in India such as lassi, chaachh, coconut milk and sharbat with a Coca Cola product! Very scary indeed, and like I said, even if this is good for the retail scene in this country, the way these companies are smacking their lips should make anybody uneasy.

According to Sitaram Yechury, FDI in retail should be allowed if it follows three criteria - "generating employment, enhancing capacities and bringing new technologies." Each of these three could be a PhD subject, or in other words, are very elaborate and detailed explanations in themselves.

Many years ago, when the debate first started, the unifying thought against foreign retail was that it will kill the mom and pop stores and the neighborhood kirana's. The response was that foreign retail will bring in foreign expertise, best practices, and money to fill the huge, huge void in storage and transportation of perishable goods that results in India losing tens of thousands of crores worth of fruits and vegetables every year because they can't be stored. If the government can ensure that these big companies deliver on their promise to strengthen (or rather build from scratch in many cases) the back-end of the chain, I can only see the rural folk benefiting, apart from the middlemen that is. Actually, even middlemen then most likely will be on their payroll.

As the top Indian Walmartian (sorry, couldn't resist that either) said,

Jain said Walmart is "willing and able" to invest in back-end infrastructure that will help reduce wastage of farm produce, improve the livelihood of farmers, lower prices of products and ease supply-side inflation.

At such a time as this, easing of the supply-side inflation will sound like music to the government's ears, and now that i've said it, I greatly fear that the great CONgress propaganda machine will turn this into their great strategic move to get India out of this stagflation. $hit. As far as the livelihood of farmers is concerned, I think i'll still stand by what I think I had written many moons ago that only a drastic, structural, philosophical, mental change will improve the lives of farmers in the country because while they have had a good meal of lip service for decades, they are starving of real reforms, at least till after the Green Revolution, and that was 4 decades ago. Since then?

If the Government says that India needs open up the retail sector to foreign firms which have been smacking their lips in the most creepy way, then are we to assume that only the western retailers are capable of bringing in the best practices into the country? Are the best practices that we are talking about a protected trade secret and only in the hands of Walmart and Carrefour? Are the western companies the only ones capable of spending the money on setting up the back end logistics in the retail sector?

The BJP raises a very valid point - first, it is true that India in a sense will end up corporatizing a lot of essential food item supply chain control into the hands of the private sector, which most likely will be dominated by the North Atlantic firms. Secondly, this whole talk of strengthening the food chain logistics has been talked about for decades, and yet the government has failed to take the lead in the creation of say cold storage's and encouragement of technology adaptation and utilization in the sector. Now the hope is that these companies will do all that. My question is that companies like P&G, HUL and ITC also sell their wares in the vast rural hinterland, so are they too using primitive and wasteful methods in supply chain logistics?

I also believe that there are some inherent constraints that even the entry of any player can't change. For example, a bad road is a bad road for a foreign player and a domestic player, and for a foreign truck with a 200 HP engine and an old Tata Truck with much less. The super duper supply chain logistics that these companies boast of in Europe or North America are backed by a strong infrastructure that India will probably not see for many many decades, if at all. So to expect those logistics operations being replicated here is naive and ignorance at best.

So let us see if the promise of creating thousands of jobs, inclusive growth, increasing farm productivity etc etc will hold true for a company that pays its employees some of the lowest wages in the US.