In FDI fiasco, who cares for consumers and producers?

The debates on FDI in Indian retail space have involved one and all except two of its biggest beneficiaries – Producers and Consumers.

Producers – who gives you the product to sell and consumers who buys them. The entire focus is now on the fringe but very important people in between these two major super powers. And the so called super power has no option but to see this entire drama being unfolded.

Let’s take fast moving consumer goods which include perishable items like dairy, vegetables, fruits and other processed foods and leave clothes, toys, televisions, mobiles and other fancy items out of this debate.

According to some studies, current size of organised retail in India stands at around $28 billion, nearly 7 per cent of the total retail market. This retail market as a whole is estimated to grow to $1.2 trillion by 2020, of which 21 per cent will be organized.

If you can’t make out what you are going to benefit from these figures, no one else can. Very simply told, the ultimate grain of truth is that the producers are looking for market and demand while the consumers are looking at competent price. Who cares for these big institutionalized studies if this mission is accomplished?

The entire backbone or the lobby behind the opposition to FDI in retail has different dimensions. The Left parties oppose it because they are born to oppose anything and everything that has ‘Foreign’ word in it though their own ideology is itself foreign. Their usual rhetoric of joblessness continues even today. The BJP and other right wing or supporting parties oppose because their mainstay in financial help are fringe but very important traders and middlemen.

The support base that many parties get from Baniyas and business community is enormous. They cannot afford to lose them.

This community will make life hell for procurement as seen during the Milk Revolution. When Amul started procuring milk from villages, these very middlemen created ruckus but it was the will power of farmers in Gujarat that the entire chain was broken. Their economy improved and consumers now can get milk round the clock making the country self sufficient in milk.

In the same way, there are brokers, dalals, transporters, Agricultural Produce Marketing Committee (APMC) besides the bunch of politicians acting on behalf of the strong traders lobby which will make multinationals run for their money.

This loyalty transcends parties as can be seen from Kerala Pradesh Congress Committee (KPCC) Chief Ramesh Chennithala’s opposition to FDI. His mass base consists of traders- or plainly told the all powerful Central Kerala belt - who doesn’t want their monopoly eroded.

So let’s see how FDI in retail will benefit the producers and consumers. To remain in business all retail giants have to reduce their prices and increase their quality and give consumers happy experience of shopping. It is not possible for them to replicate a Kirana store in terms of locations. They can have one or two stores in each cities. Why should you leave your neighbourhood kirana store to go to these retail chains 5 to 7 kms away? It is the shopping experience and quality and quantity. To do this they need to set up operations that involve heavy capital expenditure. However, this is a onetime investment. What they will recur are wages and the biggest challenge is to procure best quality items at the most competitive price.

The procurement will Lead them directly to the producers cutting at least ‘three to four middlemen’ in between. They will start negotiating with producers – which involves farmers, manufacturers etc – for better price. In the end they benefit in procurement price and quality and producers benefit from guaranteed supply and price discovery. The buyers will be happy getting far superior product at the best shopping platform.

So where is the problem? Who is at disadvantage from this entire process? They are the ‘three to four middlemen’ in each process of current system of procurement. They are the political base of almost all the political parties whom none want to antagonize.

The entire crusts of this opposition are these people. Who cares for the super powers?