On India the A T Kearney report 2013 states : “Growth slowdown, but still strong. The global slowdown hasn’t spared India, whose GDP growth rate slipped to 5 percent, down from a 10-year average of 7.8 percent. Same-store sales volume growth slowed in 2012 across retail, particularly for lifestyle and value-based formats. India falls nine spots in the GRDI to 14th; its previous low ranking was 6th place in the inaugural Index in 2002, and it was first as recently as 2009.” (source : 2013 Global Retail development index as Global Retailers: Cautiously Aggressive or Aggressively Cautious? http://bit.ly/1iTDvH0 )
There are countries that have grown, reached their saturation point in retail sector and then there are countries that are still growing, showing immense promise. India has risen to the first place in 2002 and fallen to the 14th place in 2013. There are other countries too that are in the growing phase, like Indonesia and Saudi Arabia, but not many of them are as conducive for business as India, which is why we are still ranked 14th on the list of destinations for FDI- foreign direct investment, from countries that want a piece of the action.
In addition to the massive market potential, investor countries stand to gain from India’s lower working capital cost, tax exemptions and diversification possibilities. In return what we get, most importantly is, foreign money being pumped into our economy, best global practices brought into our economy, and a service style that takes inspiration from global standards. There are a range of other derivative benefits as well and the list of benefits is impressive enough to make a strong case in favor of growth of retail sector in India.
While this can seem a win-win arrangement on the face of it, there is more to it than just gains to be made by both sides. The impact on Retail, a sector that everyone is after for FDI can fully be understood only when we take into account the way the Indian economy is modeled. When Nehru started laying down the foundation of modern India, it was believed that he, put forth the socialist model, where everyone’s interest was safeguarded no matter what position they occupied in the Indian business blue print. For Nehru the village retailer was as important as a stock broker in Mumbai and so he created an economic cocoon of sorts within which we could go about our business without the fear of being eradicated by bigger, much stronger, and globalized businesses. The same idea continues today, albeit to a lesser degree of conviction. Against this historical fact, the entry of big foreign names in the famous Indian Retail segment will ring the death bell of the unorganized independent retail shop, the kind that we are so used to doing our shopping at, from times before the big malls. This simple fact, the ousting of the small time business man is enough to set a chain reaction into motion. A ‘made redundant’ businessman, will not buy supplies anymore and so the local supplier too will die out. When the local supply system dies out the local producer too will be impacted, he will be forced to shut shop for want of suppliers. With the producers gone, the production skills, often indigenous and local, that are a craft in themselves, will also slowly be relegated to oblivion. Thus will a whole system, that had gone on for years unchallenged and that had become a part and parcel of our everyday lives, come to an end. The unemployment that comes in the way of the collapse will start a vicious cycle of poverty, which will be in sharp contrast to the progress made my organized retailers like malls and chains.
These changes will impact socially, culturally and economically the eco-system of Indian business, mostly so in the two-tier and three tier parts of India.
While this is all true and are valid reasons for our concerns, India cannot afford to continue without seriously thinking of Retail Sector seriously since this sector is one of the Indicators of Economic growth. In many developed nations Retail contributed upwards of 70 % to the GDP whereas we are still at below 60 %. The retail sector therefore needs to be looked at in a manner that takes into consideration the unique position of our Retail, because for us both kinds of retail outlets are important—Multi-storey, swanky AC mall with multiplex and the friendly neighborhood corner store grocery wallah.
In line with the above approach, Great Lakes Institute of Management has started an exclusive Center of Excellence in Retail Management that will offer an unique two-year post-graduate executive program in retail management (PGXP-RM) beginning August 2014. Know more: http://bit.ly/PGXPRM
Dr. T. N. Swaminathan
Professor – Marketing