I could not resist myself from posting this blog. I am passionate about retail industry and therefore since last three days holding on to the news and finally posting on the blog.
Govt of India (CoS) has recommended to 51% FDI in Retail industry. As there are always positives and negatives in any decision we make. The FDI brings positives as well as negatives. According to various sources retail adds 13% to Indian GDP of 1.3 trillion, organized retail is only 4% (in any case less than 10%) of the overall retail business in India. So there are immense opportunity of growth for organized retail. If we compare the organized Vs unorganzied retail UK has about 85% of retail done through organized retail. Such high dependence brings a huge risk (take an example of diversifying risk in financial portfolio management).
The positive for Indian economy here is – lots of jobs, increased in quality of service and affordability of products (due to inherent reason of business of retail). At the same time the challenge is – how to manage possibility of loss of Mom and Pop stores? These are small business people running their small shop for livelihood. A rider to manage that situation is – retailer can operate in cities with populations more than 1 million. Well no sane retailer would want to operate in all nook and corner of India from day one also smaller cities would not provide that much profitability to the organized retailers.
Growth of Indian economy and possibilities of more growth (compared to other developed economies) brings in more questions (as opposition is asking) regarding the number of 51%. Someone said – is it giving giving control of our retail industry to foreign based giants? I said yes and no both. Yes because 51% investment and No because at the end of the day people and the Govt will control buying decision and policy decisions.
The competitions will teach few lessons to local retailers as well as learn few lessons on the cultural. As they said – think global act local… let us see whether this lesson of books comes to practice, otherwise we would have other lessons from failures of foreign retailers in India.