A parliamentary standing committee on commerce in its report titled “Foreign and Domestic Investment in Retail Sector” submitted to the government has recommended imposition of a blanket ban on foreign direct investment (FDI) in retail.

“The committee…recommend that a blanket ban should be imposed on domestic corporate heavyweights and foreign retailers from entering into retail trade in grocery, fruits and vegetables,” said the report.

The committee, comprising 40 parliamentarians from various political parties from both the Loksabha and Rajyasabha, was headed by Murli Manohar Joshi- a veteran BJP parliamentarian and former HRD minister in the NDA government.

The parliamentary committee is opposed to the entry of large Indian corporates in the business of modern (organised) retailing, particularly those who sell fruits & vegetables and grocery and those who use malls to sell these products. According to the committee’s findings modern retailing results in job losses and forces small traders to go out of the business. This, though, is at complete variance with the findings of an experts panel (ICRIER) appointed by the commerce ministry to go into the impact of Big retail on conventional retailers (also referred to as ‘Kiranas‘ or ’mom-n-pop’ stores).

Not content only with the banning of large corporates from retail, the commitee also wants the government to also ban the issue of further licences for the ‘Cash & Carry’ wholesale business. Cash & Carry business is currently dominated by the world’s leading multi-brand retailers like Walmart (USA) and Metro AG (Germany). While Walmart is in equal partnership with Sunil Mittal’s Bharti Enterprises, Metro AG is operating its own. Two other foreign multi-brand retailers Tesco plc of UK and Carrefour SA of France are also in various stages of foraying into this format, which caters to the needs of bulk customers like traders, service providers, and institutions. while, Tesco has already tied up with Star Bazaar chain of Tata group, Carrefour is believed to be close to signing a deal with Kishore Biyani’s Future group.

“Government should stop issuing further licenses for ‘cash and carry’ either to the transnational retailers or to a combination of transnational retailers and the Indian partner, as it is a mere camouflage for doing retail through back door,” says the report.

India’s retail sector, according to Technopak – a well known management consultancy- is currently estimated at $372 billion. Only around 5 per cent of this trade is currently believed to be managed by modern (organised) retail. The balance 95 per cent of the retail business is still controlled by over 1.2 crore conventional small stores.

With excellent growth prospects, the retail business is likely to double in the next five 5 years. Despite this fast pace of growth, modern retail alone will not be able to meet the growwing consumer demand and, therefore, even conventional traders will also continue to grow at 5 to 6 per cent in the coming years.

On back of rising incomes, which leads to increased discretionary spending, the expenditure on food and groceries has been declining consistently. From 40% in 2003, it came down to 36% in 2008, and is expected to come down further to 32 per cent in 2013.

“The schools will seek to change the traditional outlook of the traders and educate them to adopt a contemporary approach in business to retain customers and increase profitability.” — Praveen Khandelwal Secretary General Confederation of All India Traders (CAIT).

Confederation of All India Traders (CAIT), an umbrella body which represents interests of small time traders, is setting up ‘retail schools’ across the country to educate small time traders about ways to boost their business. The move comes in the wake of increasing competition from retail giants, reports PTI.

According to CAIT estimate, there are about 50 million small traders operating within the country. According to experts’ estimates the number is between 12 and 15 million.

While, the first school is scheduled to begin from Delhi this month, the second will come up later in Nagpur. According to plans, CAIT hopes to set up around 500 schools within a year. CAIT has roped in the services of Indian Retail School as knowledge partners.

“Our fight is not against the big names in the retail industry but to help the kirana stores to transform their business from traditional retail to modern format of retailing,” said Khandelwal, while talking to media persons in Delhi.

Retail experts from different parts of the country will take classes in the schools. According to N K Pandey Chief Executive Indian Retail School, “The programme scheduled to be imparted in the schools has been well-structured and customised.”

The traders will be trained in subjects like visual merchandising, customer servicing, marketing and retail operations monitoring.

CAIT, in the past, has spearheaded several agitations against allowing FDI in retail and entry of big corporates in retail.

“In the last four years, an estimated two crore traders have been rendered jobless due to the opening of big shopping malls in the country.” — Banwari Lal Kanchal, President, U P Udyog Vyapar Pratinidhi Mandal, and Member, Rajya Sabha (Samajwadi Party).

UP Udyog Vyapar Pratinidhi Mandal, which successfully spearheaded an agitation of small traders last August, protesting against entry of big corporates and FDI in retail, has now demanded promulgation of the ‘Shopping Malls Regulation Act.’ This Act will protect interests of traditional kirana merchants in the country.

“The Mandal will soon launch a ‘Halla-Bol’ agitation against corporate retailing. We want the central and the state governments to work in tandem and stop the onslaught of big corporate houses on the retail sector,” said Banwari Lal Kanchal.

“We want the government to control the uninhibited growth of malls in the country, which is eating into the businesses of the kirana and small stores,” said Banwari Lal Kanchal.

Kanchal cited examples of Malaysia and Poland, where such an Act is already in place. Such an Act tries to strike a balance between large and small retailers, he added.

Kanchal, who is a members of the Parliamentary Standing Committee on Commerce is expecting the Committee to submit its report to the central government before the end of August, 2008.

The parliamentary committee headed by ex- union minister Murli Manohar Joshi is studying the impact of big malls on small retailers. The committee is also studying the details of the various laws enacted by the Malaysian and Polish governments in this regard.

It may be recalled that Kanchal’s protests last year had resulted in closure of Reliance’s ‘Fresh’ retail chain in Uttar Pradesh.