As Prime Minister Singh recently noted, India needs greater competition to keep food prices in check for the consumer. This would require the government to take a “firm view on opening up the retail trade.” Opening retail in India to foreign investment will accomplish three key goals for India. It will modernise the Indian retail sector; create greater competition; and help improve on the efficiency of the food value chain. This will minimise the differences between retail and wholesale prices, lowering costs for all of India’s consumers.
Another ancillary benefit of foreign investment in the multi-brand retail sector will be to stimulate growth among suppliers and generate employment opportunities in India. Opening up this vibrant sunrise sector of the Indian economy is clearly a win-win move for India’s government and its people.
When my family and I first arrived in New Delhi, we were struck by the local phenomenon of kiranas — they immediately reminded us of the ‘mom and pop shops’ we love in our home state of Indiana. Since kiranas provide such specialised service throughout India’s neighbourhoods, they should always have a place in the hearts and homes of Indian consumers, just as our local shops in Indiana have for us.
When I campaigned for votes in my elections, I would always walk up and down the mainstreets of my small towns. I enjoyed poking my head into all the small businesses and shops — selling food, specialty goods, and important products to residents. These store owners represented the heart and soul of the community. In India’s large and ever-growing marketplace, there is room for both modern retail and the familiar kiranas. Modern retailers provide increased choices and cost savings to consumers and also benefit farmers, suppliers, and the economy as a whole.
For example, experts estimate that between 30 and 40 per cent of India’s fruits and vegetables are lost on the way to the marketplace. Such inefficiency is needless and avoidable, and indirectly increases costs to shoppers. Improvements in the supply chain will help address this challenge. Indian and American companies are already working together to help solve this. I visited wholesaler Bharti-Walmart, which is a joint-venture between Bharti Enterprises and Walmart, providing a model of how this partnership can improve India’s supply chains and benefit Indian farmers and consumers. Bharti-Walmart operates a business-to-business wholesale store, Best Price Modern Wholesale, in Amritsar.
To supply the store’s produce section, Bharti-Walmart directly engages with farmers across Punjab to support modern farming, including safe and proper use of pesticides and fertilisers, and techniques for raising seedlings, irrigation and weed control. Farmers deliver their produce to a distribution centre where it is collected and packaged for delivery to Best Price Modern Wholesale and Bharti Retail’s Easyday stores. The distribution centre benefits the wholesaler as a processing and distribution point, and also provides clear benefits to farmers by providing more and better market access. In Amritsar the farmers who participate receive seven to 10 per cent higher prices than they would on open markets, in addition to expert advice on crop planning and management.
Modern retailers develop close partnerships with suppliers, and in particular, small and medium enterprises (SMEs). Out of Bharti-Walmart’s 116 suppliers, 70 per cent are SMEs. When a pickle producing company in the Punjab — struggling with outdated manufacturing infrastructure and a lack of knowledge about food safety, packaging and branding — was interested in scaling up its business to supply Bharti-Walmart stores, Bharti-Walmart worked with them to establish better manufacturing practices and upgrade their equipment, helping the producer ensure food safety and obtain food grade certifications.
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Kirana owners may now purchase the company’s pickles at the Best Price store and consumers at Bharti Retail’s Easyday stores, providing a safe and affordable quality product to Indian shoppers. In addition, the pickle producer now has a strong enough product — and the capacity to produce it — that it is sold across the country at global export standards.
The benefits of modern retail do not end with consumers or even with suppliers. There are several advantages created for the entire economy. Jobs are created for clerks, stockers, and sales assistants. Modern retail also has a substantial multiplier effect. In order to stock retail outlets, numerous jobs are created by suppliers as they scale up their businesses and by companies that provide transportation, warehousing and logistics to support supply chains. Modern retailers also pay taxes, and are a significant source of revenue for local government.
Modernising India’s retail sector is one of the best ways for India to address food price inflation and maximise its food security. The benefits to farmers and consumers are unmatched. As long as foreign direct investment in multi-brand retail is prohibited, India will not maximise the benefits that modern retail can bring to farmers, consumers and governments.
Opening up the retail sector will support inclusive growth, help keep food prices low, and provide positive benefits to the entire Indian economy. Prime Minister Singh’s statement on the importance of opening up retail trade shows the way forward for India to realise the potential of its farmers, boost the efficiency of its suppliers, and maximise cost savings and choice for its consumers.
The author is the US Ambassador to India