Tuesday, September 18, 2012

FDI in India - Insight from a Supporter

To RP - For what it's worth, I do have the blog set to accept all comments, including anonymous. However, Google and Disqus seem to have their own opinions and thus do not always work properly with comments. I currently have 37 comments I can't even see/access due to this. I am actively trying to fix this because I like comments and I like to read them. Hopefully in the future you will not have the same posting issue when you come to my blog. I appreciate you taking the time to contact me with your thoughts. I hope you're not offended by my posting this. I thought the information and insight could be useful to some of my readers.

Below is a comment I received on my FDI post. It brings up some points I wanted to share with you all. I've put the comment in bold so that it doesn't get mixed up with my personal comments below it. Would love for you all to also weigh in with your thoughts.

Hi,

This is a comment that I wrote on your post on FDI. Could not add it there because it was asking for twitter\fb\google id etc.
Your blog is good and can do away with not allowing anonymous comments. You can always enable comment moderation. What matters is the content of the comment and not who the user is. Just my two cents :)
Here was the comment that i wrote:
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While I do agree that some of your concerns are correct but whatever you have written may not be true in the Indian context. Following are the reasons that make me believe so:

1. India's population is 3 times the size of US and therefore there is way more scope for bigger entities like Walmart.

2. We have the example of such large retail chains operating in other countries. Therefore our laws can be made in a way to control the big chains to suit our needs and differently from the rest of the world. Remember they need us so we can tailor make laws to favor our interests.

3. FDI is foreign direct investment. We already have supermarkets like big bazaar, reliance fresh, star bazaar( a TATA company) operating in India. These have not wiped out the kirana stores. The new FDI law only allows foreign investment in a sector that already has big Indian players( though i agree they are not the behemoths like Walmart). These big Indian chains can any day do what a Walmart can so why oppose only foreign investment(FDI)?

4. India is probably the largest producer of fruits and vegetables in the world. Most of it goes waste. The Indian government is not going to provide the kind of back-end infrastructure for its preservation ( They would have if they wanted to by now). These big chains are masters of supply chain management. And their expertise will only help.

5. There are around 10 million kirana stores in India and the number of farmers is many times more than that. The number of consumers is probably the entire country. The farmers in India live a hand-to-mouth life. This is not because what they produce sells cheap but because the middlemen make all the profit from farm to market. Tightening the supply chain will insure that farmers get a reasonable price for what they produce and the consumers pay less than they pay now. Is it justified that because of 10 million kirana store owners the rest of the country( 1 billion people ) suffer?

In case you have not noticed no big farmer organization or a citizens group is opposing this. The only people who are opposing this are kirana store associations, some politicians (obviously for political gains) and the left parties (The are commies who hate anything American anyway).

6. Opening these big stores will only increase competition and increasing competition is only good news for consumers (See the example of mobile telephony or the banking sector).

I believe FDI is an idea whose time has come. It is time to embrace it and make the most of it.


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I can see where FDI would be good. I too have been to Big Bazaar, several of the Reliance Family of stores and several Tata owned properties. They are good and appeal to the Indian population in many ways. I understand how they appeal to the Indian shopper and can see how they draw in customers. This is not a surprise, marketing is everywhere.

I was previously a marketing student. I hated it. Absolutely hated it. But I did learn from it. I learned more than I wanted to know about American marketing culture. There are some very deceptive things going on in stores across America that are aimed only at making you purchase items you don't need. This is what I fear will eventually cause a lot of trouble to India.

Yes, FDI means that countries from everywhere can come in. These countries will also study the Indian landscape and establish new marketing ploys. They will design them with the Indian shopper in mind but will include their manipulative tactics so they can make more money. These bigger businesses seek to dominate the market, not be a part of it.

What India currently has is designed to work in harmony much more than the stores in the US. (I can't speak for other countries.) In the US, they seek domination as much as possible. We have laws here specifically designed to stop any one store from taking over too much because it is a huge problem. (Google US Monopoly Laws for more information.) Giants like AT&T have proven how ruthless American businesses tend to be when they want to dominates.

I really don't want to see this seep into Indian culture. I know FDI is inevitable BUT, Indians as a whole need to be more educated on how to protect what is valuable in India. It's culture. And that culture includes the shops in the bazaar. Not just the Katana shops. Big businesses (like Hyper City) are affecting the little guy selling suits in the local bazaar more than you realize. I've seen it. Yes, aunties still prefer the bazaar but the younger crowd prefer the malls. 

So this FDI business is going to destroy life as you know it for your children and the future generation. It's going to reshape the retail landscape. That's my only concern. I personally like the bazaar. I love my little katana shop and the man who sells the bangles and the paint and my friend suit shop. I love the personal attention I get at each store and I love how they always ask my MIL how I'm doing and they always try to teach me a little Punjabi while I'm there.

I used to love this same level of attention in the US. It's almost gone now. It's fading fast in the smaller cities. As hard as it was for me to live in India because of my health, I know for sure I would miss the small stores in the bazaar. I would miss neighborhood life.

I don't disagree with you that FDI will be good in some ways. In the beginning it is going to be great. My concern is what will happen in 10 years, 20 years, etc. Where will the little katana stores be when the children of India much prefer the big brands, imported goods and the allure of these massive retailers. It will happen through what we commonly term here "seductive marketing." These stores will lure unsuspecting younger Indians into thinking they need these brands and that the little guys are not as good.

Your thoughts on the middle man are really good. That was happening here too. They used the same idea to lure in Americans. We had all kinds of ads to cut out the middle man. It worked pretty good. But now we're back to having a middle man. It's just that now the middle man is harder to find, cost more money and usually only works with the big stores. So the little guys are screwed basically. They just can't handle the volume that he middle man now deals in.

I really do appreciate your comments RP. It's always good to see/hear a different perspective. And I will always stand by my thoughts on this - that I hope and pray India does not let FDI do to it what FDI has done to other countries. Be on guard India, fight for what is the heart of your country!

7 comments:

  1. I think the concern is unwarranted. Indian companies are as ruthless as any other. There is no reason that US companies will totally decimate indian ones. In fact, I truly feel the US corps need to be more concerned. In all probability they will bleed money for years to come because of cut throat competition from Indian players. Most of them will sell out and leave ... a few of those who stay will opt for some partnership where even their home operations will be vulnerable to Indian partners (or predators). And this is the most likely scenario in 10 or 20 years.


    I think FDI is eminently welcome ... we are short of capital and FDI can only help. If your concern is for preservation of kirana stores then it is wasted coz indian companies are anyway going to do what you fear US ones will do. But you under estimate the resilience of Kirana stores vastly. Even with the big muscle they have, Reliance and Birla haven't dented these mom-and-pop stores one bit. Sure in future, they may not exist, but by then their families will anyway be not interested in running small stores.


    And you ignore one more point. There is a technological landslide happening in India as well as the rest of the world. Even the likes of wall-mart will be threatened by it, if they do not adapt. Kirana or no Kirana .. this is inevitable. This is the space of online trade. Retail space of physical markets may be shrunk by a huge amount in future. And it is very hard to beat Indian players in this arena ... at least not in India.


    So the only point of your concern is non-indian capital entering Indian borders. And such a concern assumes that Indians (as well as all non Americans) are sitting ducks for american manipulations. It could be the other way round just as well :)

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  2. >{
    They will design them with the Indian shopper in mind but will include their manipulative tactics so they can make more money.}


    Kirana stores also love doing that as much as possible.


    >{These bigger businesses seek to dominate the market, not be a part of it. }


    That is nature of business. All business try to do that. Given a chance all kirana stores would also love to just that -- dominate. You probably have no idea how ruthless the likes of Reliance are.




    >{What India currently has is designed to work in harmony much more than the stores in the US. (I can't speak for other countries.) }


    That, I am afraid, is just a cute illusion.

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  3. what are the problem would face after allowing FDI in Inda?

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  4. Yea you do habe a problem with the comments. When accessed on webview the non disqus comment dont show up,only in mobile view all comments show up. At any rate, I find the walmart example slightly amusing. We used to have a walmart here. I guess not enough people went there and it got closed down.,actually i think i went there one time and it was really boring. It didnt have anything really appealing and i dont really remember anything about it except after alll that walmart talk,such a boring store?? So noone was really crying when they shut down. And in our region thats odd because we have stores of chains that nationwide are not operating and declared bankruptcy. I dont know how its possible but it seems to be working. At any rate alone looking at walmarts not so worker friendly policies and ruthless fame it has as an exploiter would cause me not to welcome walmart anywhere. And id be highly sceptical about high flying promises. Walmart cantt revolutionize infrastructure, they will have use the roads and power grids that are already available. So that could mean that power prices could go up for the individual consumers because demand will go up.on the otherhand if farmers are bound to walmart that will put these cooperations in a position where they can dictate terms to the ffarmers. And in the long run they wont be farmer friendly.

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  5. Long time no see! I hope you've been well.

    You make a good point. I had noticed just in the short time I was in Amritsar that many stores had closed from my previous visit. New businesses weren't moving into the smaller stores. As I hadn't taken too much note of businesses like Reliance Fresh, etc. I wouldn't have equated that to the big business squashing the little guys.

    I **hope** Wal-Mart gets threatened. I really don't like Wal-Mart. Only problem is they are online.

    My main concern isn't about capital entering Indian borders. It's about capital leaving Indian borders. You were on the right track with my thinking though. I do have concerns over how FDI will change the retail landscape.

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  6. Okay, you got me on the cute illusion part lol. I just think India's retail system functions well with the various levels it has within it. Maybe "harmony" was the wrong word.

    I can't remember if you've been to the US or not but what made me write that line is the deceptive tactics I was experiencing at McDonald's that day. Let me explain.

    I ate right before going to McDonalds because I don't like their food that much and it messes up my tummy. (I needed their internet because ours is still having issues.) Now, going there on a full stomach I sat down and within minutes started feeling hungry.

    That reminded me about marketing classes and how we discussed product placement, paint colors, decor techniques and even the music choice in the room. All of these were designed to create an ambiance that made you want to purchase more. I think this is the first time I ever truly noticed those in the US. You don't have all of that in India...at least not in Amritsar. It's one thing I hadn't really missed while I was there. Now coming back, I'm being subconsciously duped into purchasing things I didn't want or like...like that food!

    Everything in the US is designed to make you think you want something, especially when you don't.

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  7. I really enjoyed your story of Wal-Mart going under. I wish it would go under here. I like the smaller stores much better. I remember when Wal-Mart first came in and they told everyone how you could find everything cheaper at Wal-Mart. I am a skeptic about these things and noticed cheaper prices all over the city. Something would be $1.00 at Wal-Mart and 88 cents somewhere else! That's right before they started that price matching thing (which told me I wasn't the only one to notice). Before long the cheaper stores started closing down. I avoid Wal-Mart every chance I get but in my town (and probably others like it) there's not much left. Of course, I will never buy Wal-Mart clothes. EVER. The quality is just absolutely ridiculously low. I have to drive 30 minutes to go buy clothes in the next city over just to avoid Wal-Mart but it is worth it.

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