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India faces roadblocks to reforms

Publication Date : 25-09-2012

 

The opening up of India's retail and aviation sectors is a bold step by a government faced with a sluggish economy, but challenges lay ahead

 

Sitting behind a counter overflowing with breads and fried snacks, grocery store owner Anup Sharma directs his three assistants as they attend to customers, some of whom the greying, bespectacled shopkeeper has known for years.

Sharma's shop is in a south Delhi market, next to eateries, butcher shops with skinned whole lambs hanging from hooks, and carts of vegetables and fruits.

Until now, business for the ubiquitous mom-and-pop stores, or kiranas, has been good.

But with India opening its market to foreign supermarkets last week after years of political hand-wringing, shopkeepers such as Sharma are worried it will not be for long. "Of course, these big guys will muscle us out; it is a question of our survival," said the 53-year-old, who inherited the 200 sq ft shop from his father.

With about 50 million kiranas and some 220 million people dependent on them for a living, opening up the retail sector to foreign giants is an emotive issue. Supermarkets now make up less than 5 per cent of a US$470 billion retail market.

Supporters say supermarkets will bring more choice to consumers, boost farm earnings, create jobs and reduce the epic wastage that occurs around India because of poor storage.

In a country where seven out of 10 people own a mobile phone and more people are travelling by air, India's corner stores appear untouched by two decades of rapid economic growth. In this closed market, shopkeepers thrive on a reputation built on personalised service.

"You need some bread and eggs quickly, but you can't go out, just call your neighbourhood kirana and it will deliver," Ms Snehalata Acharya, 41, a housewife, said as she shopped for butter and biscuits at Sharma's store.

In New Delhi's Azadpur wholesale market each morning, mounds of potatoes lie inches from the tyres of trucks trundling past as workers carry sacks of cauliflower and pumpkin through clouds of exhaust fumes and the stench of rotting produce.

Poor storage conditions and lack of refrigeration mean that India loses more than a third of its fruit and vegetables each year, keeping inflation high.

Kiranas vary in size, with less than 5 per cent of them bigger than 400 sq ft. The average Walmart store has floor space of more than 70,000 sq ft.

Indian shoppers are enthusiastic about the prospect of foreign grocers. "If the big supermarkets come and they sell cheaper, then most of us will buy from them. It is also convenient and you have more choice," Avinash Samant said as he and his wife shopped for groceries in a market.

To appease naysayers, foreign retailers will be permitted only in cities of at least one million people. They must source almost a third of their produce from small industries, and states can opt out of allowing them in.

Foreign retailers must also invest at least US$100 million and spend half of that on "back-end" infrastructure.

Industry experts say shopkeepers' fears are unfounded because there is plenty to go round.

"Organised retail is less than 10 per cent of the entire retail sector," said Gurcharan Das, the former India head of Procter & Gamble. "There is enough safety valve built in in the new policy."

Despite the backlash, Prime Minister Manmohan Singh has stood firm, saying kiranas have nothing to fear.

At Sharma's grocery, Singh's words hardly inspire confidence. "Let's see what happens," he said. "Maybe the small things they will buy from us; for bulk purchases like monthly provisions, they will go to supermarkets."

 

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