Friday, September 02, 2005

Re-tale, 2 views

Two contrasting points of view, from two totally different persons.
In the Financial express, Kishore Biyani argues for a delay in retail FDI while in the Indian express, Nandan Nilekani argues for retail FDI. Both articles, though, agree that retail is hot and will be a future growth engine for India.

Kishore says
...Today, retail in India is huge, close to $200 billion, of which organised retail accounts for just $6 billion. This $200 billion should become $300 billion in the next five to six years. This is a time when organised retailing is just getting into full steam and the opportunity is huge. Organised retail in India is expected to grow at 40% for the next five years, thanks to the nascent stage of modern retail and the ‘malling’ of India...

Nandan says

...(opening doors of retail to FDI) will significantly augment our productive capacity. The US$50 billion in exports, combined with another, say, US$10 billion of organised retail domestic will create the need for thousands of factories, to make jeans, curtains, fans, cans, bottle caps, and what have you. It will be the catalyst to manufacturing and agriculture what IT was to services.
And finally, it will create millions of jobs in the factories, the fields and the transportation companies. In an economy growing at 7-8 per cent it will be additional jobs as the expanded domestic capacity caters to urban areas which will grow from 30 per cent to 50 per cent of our population in the next 20 years....

Kishore ends his piece with
...There is enough empirical evidence to indicate that most other governments allowed domestic retailers to gain size before opening up the sector. I believe that Indian retailers too should be given this opportunity and allowed a couple of years to demonstrate what they are capable of....
Every country goes through a demographic boom, when a majority of the population enters the earning and the spending bracket. India is currently going through this and we should utilise it
to grow the country, rather than gift-wrap it and allow others to grow their revenues, profits and market capitalisation. If, with organised retail at 3%, India is attractive, at 10% it
still will be. But by then it will be a level playing field. Allow Indian retailers to gain size and then open the markets. I do not oppose FDI in retail; I just feel we are opening it a bit too soon.

Nandan ends his piece with a beautifully persuasive push

...And, who knows, like in the software, the telecom and the airline industry, the ultimate winners may not be the foreign companies but our own homegrown entrepreneurs who time and time again have shown what they can do when they have been unshackled and exposed to global competition. Over a decade ago, we did some far-reaching things that put the sparkle back in the eyes of our educated urban youngsters. What right do we have to deny to the millions of kids growing up today, the same opportunity in our fields, factories and stores? The only way not to let them down is to create the supply chain pipes that will connect our farms and factories to the consumers of the world. For that we need 100 per cent foreign direct investment in the Indian retail sector. There is not a minute to lose. We should just do it!

When two giants such as the two above comment, there is little left to say. I am not sure why the honcho of Pantaloon and Big Bazaar is worried. His stores and concepts are different and will give more than a run for money to the Walmarts and the Tescos when they come in. I personally feel that retail FDI has to be allowed and agree with what Nandan has to say rather than push for a delay much like the Swadeshi club did.

Retail FDI, is what will break the shackles of the middlemen that the Indian market has been under and which will ensure that the economies of scale that the market offers will be passed on to the end customer. More organised retail will also sound a death knell to the retailers who dont bill and evade a substantial amount of tax, VAT or no VAT. Agriculture (and therefore farmers) will benefit to no end.

Retail is a future growth engine for India. The sooner we kickstart it, the better.

2 comments:

Nilu said...

That was refreshing.

Nandan's argument was refreshing not because he argued for the free markets but for removal of control being an end in itself.

By the way nice to see a namesake having a good one ;)

Neelakantan said...

Thanks!