Allying fears that opening up of the retail sector for FDIwill hurt small kirana shops, Plan Panel Deputy Chairman Montek Singh Ahluwaliatoday said modern retail is an expanding segment and it would more than doublein a very short time.
"I don't think FDI in retail is threat to smallretailers. Modern retail is the expanding segment. Those who say that the smallsector would be hurt, I think they are wrong by the way," Ahluwalia saidin a CNN-IBN TV programme Devil's Advocate.
Asked that the much-hyped reform was once opposed by PrimeMinister Manmohan Singh as then Leader of the Opposition in Rajya Sabha in2002, Ahluwalia said, "I don't recall what was said by every person onevery day. Things move forward, perceptions change, circumstances change. Idon't think that there is any lack of clarity on FDI in retail. BJP was at thattime pro-reform."
When asked about the impact of FDI in retail in Thailandwhere 67 per cent of the kirana shops had to be closed down.
He said, "Look it is based on some studies I am notfamiliar with. Central point that we should make is, in a growing economy, ifwe have to achieve our objective of 8 per cent (economic) growth, in that kindof growth scenario total size of retail market is going to be more than doublein a very short time."
Lauding the government's decision to notify FDI in retail,Ahluwalia said, "This is a structural change. I don't believe modernretail can expand fast enough to raise real wages. What happened in Thailand isnot a predictor, what will happen here. In the next 20 to 30 years, do you wantsmall retailers to have same share what it is today. I think it is completelywrong. This is like saying when taxis were introduced the share of tangas(horse cart) went down, one could bring them back, no."
When asked what would be the impact on retail which is thesecond biggest employer in India with 44 million jobs, he said, "I thinkit is complete misreading because you need to look at, do you wantmodernisation of retail sector or not. If you want modernisation of retailsector, you want a upward pressure on quality of employment, modern retailproduces better quality of jobs."
"My point is fewer jobs, if labour growth is going downto one per cent and GDP is growing at 8 or 9 per cent. Jobs would be created inmany different sectors. Please look at studies on what is the quality of jobsin traditional retail," Ahluwalia said.
"The quality of those jobs is very low. Young peoplewith education who were joining the labour force will be quite happy in workingfor modern retail than being employed at traditional retail," he said.
On the apprehensions that WalMart presence could have adevastating effect on small retailers as per a UNI Global study, Ahluwaliasaid, "I am not talking about WalMart. It is an individual company. Ithink the circumstances are completely different and the reason for that is inthe US, it is very easy for someone to increase its share hugely by following aparticular pricing policy."
"The consumer in US is geared to rush to hyper markets,buying for a week buying for a month. That won't happen in India. Indian caseis one where modern retail has 6 per cent of total retail market share. Itwould be an extra ordinary achievement if they double that in a five to eightyears. We are least penetrated by the modern retail".
About Indian economist Jayati Ghosh's estimate that oneWalMart store would replace 1,400 small retailers at the cost of 5,000 jobs, hesaid, "The notion of modern retail, it may involve much higher labourproductivity at the front end but at the back of that it is entire new supplychain system where jobs are being created not in selling physically to peoplebut in upgrading the supply. Unless you take that in account this comparisonare meaningless."
About BJP leader Arun Jaitely's concerns that foreignplayers will capitalise on India's high-cost manufacturing base, Ahluwaliasaid, "What he is talking about, is its impact. Tell him to go to LokNayak Bhawan, where there are a lot small retailers every one of which talkingabout Chinese goods".
He added, "The notion that the foreign retailers aregoing to be faster to import at importing than our own modern retailer or smallretailier... We have huge tendency to import. Today, Indian modern retail hasno compulsion to do domestic sourcing. If there is FDI, they will be compelledto do significant amount of domestic sourcing."
On the law against predatory pricing, Ahluwalia said,"You want to go to India consumer, and say I am going to have a law that preventsa retailer from lowering the price at a time when Indian consumer is saying doeverything that lowers the price. I mean this is just non-sense."