FDI Retail – A WIN-WIN for East and West

By- Vavani Sarmah

We are a living in a consumer driven market and society and the consumers in west are getting older not innovating, whereas consumers in India and China are growing, so west don’t have any other natural lifting other than to invest in east to actually pick west out of the swamp economy and recession.

In divergence, regardless of the size and growth, India’s retail sector is disorganized, very chaotic, confusing and un-systematic. In most cases, 75% retailer pays little or no tax. In contrast with China, for example, 25% retail are well organized despite the abundance of malls; India’s share is a hardly 6.5% and is very small. There are lots of rooms to grow without harming the traditional retail culture and traders. The current statistics projection is to about 750 million new Indians consumers will join by 2015, about 55% of the Indian population will be under 20 years of age, urbanizing is growing at a very high speed and will be around 32-35%. Retail market grows at 10% rate; however only 7% populations are being engaged in retailing. World Bank is estimating Indian retail market is booming about USD 300 and predicted to capture 30 – 35% market share by 2015 and contributed about 9% of the GDP. This makes India is the hottest Retail destination for all global company. It was ranked as the most attractive retail destination among 30 emerging markets for two years consecutively. The other very important aspect of Indian retail is that almost 67% retail sales come from Food and Groceries that too very un-organized retailer. Companies like Wal-Mart, TESCO, COSTO knows that and potential to increase the farm income by 20% by connecting 35000-40000 farmers in their network by 2015. Also, FDI in retail will give a further boost to provide more opportunities to micro, small and medium traders general and food and packaging industries in particular.

As a result, the Measures taken by the Indian government to open up the country to FDI in retail is very important and in the same time controversial. But, “to match Chinese growth rates, India must open the retail sector for FDI” as per Goldman Sachs’ Chairman Jim O’Neill.

However, there might be a possible cost in local Indian traders and small time retailers. As per BJP the main opposition party, the government initiative could kills 4 crores local and self-employed micro, small and medium businesses by creating only 1-1.5 crores new jobs against FDI in retail sector. That is why “it’s a huge development initiative and highly controversial. It has had such an undeveloped commercial approach to retailing and agriculture that (it) could be a massive thing. India could get to Chinese style growth rates,” O’Neill said. However, he said it was not just a case of opportunities lying only in the emerging economies. The current debt crisis overwhelming Europe and western countries masked good news from the developed world. In this current crisis, western countries including Europe suffer from no or less growth and from imported inflation. That means they have negative real growth and societies fracture. Businesses are closing and entering new paradigm. The self-fuelled consumer society growing in countries like India and China, day by day their consumer base increasing and the dependence on the West is decreasing. Hence this marriage FDI with Retail is perfect marriage from both and short and long term prospective.

The Author
Vavani Sarmah (Seattle, Washington) is a renowned professional and entrepreneur with over 15 years of experience in industry. In 2005, he started Rangoli Bazar a Food and Groceries retail store in Philadelphia. Since then he is holding and associated with different organization. Currently he is the CEO position at ClearWin Technologies. He can be contacted at +1-408-891-6687 & vavani@wharton.upen.edu.

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