The problem of Indian Retail

The sheer quantity of small shops, market stalls and street-sellers is an immediately obvious characteristic of India; the only requirements to set up shop are a space next to the road and a tablecloth.

One of India's small retailers

The Indian parliament, in winter session is currently in paralysis over the ‘FDI in Retail’ issue.  Indian newspapers write only in acronyms, but Foreign Direct Investment is a recent removal of the Indian law restricting ownership of multi-brand retail developments to less than 50%.  Conventional Indian malls, as found in the centre of Raipur are really an agglomeration of small shops that open directly onto the street.  Its more about congregation, than the western hermetic, internalised mall environment.  The law doesn’t prevent these though and many are springing up on the outskirts of Raipur, catering for the increasing wealth of its citizens.  The FDI restrictions did effectively prevent large format retailers though, especially global supermarkets but also Ikea, who have been one of the first to confirm Direct Investment now the restrictions are being lifted.  The debate paralysing parliament is around the likely impact on India’s millions of small retailers.  Our experience in Europe is that supermarkets do have a distorting effect on the market, but of course they cater for real desires and liberate a portion of people’s time that would otherwise be spent grocery shopping.  The Hindu nationalist party BJP have argued that the FDI law is unconstitutional; being anti-socialist, but the motivation behind the change is also based on a social problem.  India produces enough food for all of its population, but storage and distribution are so poor that food rots whilst many go hungry. The Government’s hope is that global retailers will be able to transform India’s distribution networks where the state has failed to. Whoever is right, this will be an unprecedented experiment, affecting more than 1 billion people.  

Mixed-use building in Raipur, with retail at the ground floor