With its shelves packed with biscuits, toiletries and cereals, A-1 store has stood at a corner of New Delhi’s tony Jor Bag shopping area since 1955. But owner Harish Chandra Mishra is worried.
A slew of supermarkets opened by big Indian companies like Reliance Retail Ltd and Pantaloons Retail India Ltd in nearby malls have already eaten into his business, and Mishra said he thinks the entry of international chains with their ability to provide cheaper goods and greater variety might lead to the end of his mom-and-pop shop.
India’s retail market estimated at about 590 billion dollars has long been dominated by shops like Mishra’s, but that might change with the government allowing global chains like Walmart, Carrefour and Tesco to enter the retail sector.
‘It is difficult to compete with the supermarket,’ Mishra said. ‘They source their goods in bulk and get good rebates and sell cheap. We can order only as much as our shelves and storage permit.’
‘If there is a megastore in every locality, it is bound to cause a fall-out,’ he said.
By his reckoning, only those shop owners with the lowest overheads that do not pay rent and run their shops from their residences would survive.
In Canada, big retail chains that include Metro Inc (the third largest grocer in Canada), Loblaw Companies Ltd, Shoppers Drug Mart Corp and Canadian Tire Corporation Ltd, Alimentation Couche-Tard Inc, Empire Company Ltd and the Katz Group Inc. are all watching the developments which has the potential to open up a whole new market are watching the developments in the world’s largest democracy.
The government’s decision to open the country’s retail sector to foreign supermarket chains, allows 51-percent foreign direct investment (FDI) in the multi-brand retail sector. It also decided to allow 100 percent investment in the single-brand sector
New Delhi said the move would create an estimated 10 million jobs as well as protect small shops and farmers.
Opposition parties, led by the BJP, have paralyzed the winter Parliament session as they remained unconvinced at the policy, which they say will have the opposite effect.
Across the country the policy has triggered clashes, riots and shutdowns.
In Rajastahan, protesters participating in an anti-FDI stir clashed with the police and attacked a Bharti Walmart outlet.
Several Indian states have also opposed the FDI in the retail sector while leading Ghandian activist, Anna Hazare has supported the call for strikes against the government’s decision.
“Inviting foreigners to set up shops here is not correct. They are not going to come here to do service. They will be here only for commercial exploitation. Keeping in mind the sacrifices of lakhs (hundreds  of thousands) of freedom fighters to drive out the foreign power and attain independence from foreign rulers, the government should not allow this FDI in retail,” he said.
“Several states have opposed FDI and also said they will not allow it. People too are opposing it. This is a democracy, and people’s wishes should be heeded to. Without dragging much, the government should roll back the decision, heeding to people’s wish,” Hazare said.
The so called ‘supermarket revolution’ has forced the Indian government into a rethink this week saying it is putting on hold its decision.
However, opposition leaders said they want a complete rollback of the policy, and not just hold over.
Amidst the crisis, Canada has come out in open support of India’s move to open its retail sector to foreign direct investment
Canada says experience shows the move will facilitate prompt and proper marketing and fetch farmers good price for their produce.
Sara Wilshaw, Minister Trade, High Commission of Canada in India, said multi-brand retailers in the food and consumer goods industries of her country would likely be “very interested” in this change in FDI policy.
“India’s growing middle-class consumer obviously represents a significant market,” she noted, speaking to Business Standard. “Opening this sector to the increased participation of foreign retailers will provide for a greater range of consumer choice as well as an attractive investment opportunity.”
Wilshaw said there were instances in India as well where farmers have got assured returns when they have entered into contract farming for big retailers. “In India itself, Mccain Food Ltd changed the lives of almost 4,000 farmers in Gujarat when it entered into an agreement for contract farming with them,” she recalled.
Not only did the earnings of farmers grow; they were also helped with modern technology in production and also storage and transportation, the diplomat noted.
Mccain Foods (India) Pvt Ltd is an arm of the Canada-based McCain Foods Ltd, the world’s largest producer of French fries and other oven-ready frozen food products.
Colin Jeffares, assistant deputy minister of agriculture and rural development in Alberta province, said big retail chains would help farmers. “Moreover, in North America, we are moving towards contract farming,” he pointed out. “It gives guaranteed price to farmers and helps them in managing their production and price.”
But the activist Hazare has a different view.
“If this decision is for the benefit of the farmers, why has the government not done any good for them and prevented their suicides in the last over 60 years. This decision is not good for the farmers,” he said.
According to a 2008 report by the Indian Council for Research on International Economic Relations, small shopkeepers had experienced a decline in sales and profits since the big Indian retailers entered the market but this drop would be offset as India’s middle class and its income grew.
The study concluded that with the retail sector growing about 13 per cent annually, there was space for both the organized and unorganized sectors to grow with the latter expected to quadruple its share of the retail market in four years to 16 per cent by 2012.
A majority of the 2,020 unorganized small retailers across 10 cities who participated in the council’s survey indicated they would prefer to continue in the business and compete rather than exit.
But that was 2008. Today, shopkeepers like Mishra said the entry of big foreign investment-supported supermarkets might make it that more difficult to sustain a business in which profit margins have already shrunk.
Mishra said he hoped his children would get government jobs, as he does not see a future in his business should the foreign retail giants come into India.