One Step Ahead towards Retail

The recent bill passed in the Parliament that allows 51% FDI in multi-brand retail has created controversy in the political space. The opposition parties are threatening to stall the Winter Session, at a time when Parliament cannot afford to miss the session. Although it is the nature of Opposition to vehemently oppose every move taken by the ruling party, this particular discussion has aroused my interest.

The Congress believes that entry of global players into multi-brand retail space will enhance the entire chain and ultimately benefit the “aam aadmi” in multiple ways, by creating many jobs, by easing prices via supply strengthening, and creating an excellent farmer-to-market infrastructure. The government has ensured this by restricting companies to invest at least $100 million and 50% of it in building back-end infrastructure. Given these rules, there is no doubt that there are going to be positive effects of the decision.

These global players were eagerly waiting to tap the potential India has. They have at least 20 years of experience in building end-to-end infrastructure, and flattening the entire retail process. The kind of technology Wal-Mart offers in retailing is second to none. It has such command over its supply chain management that it is bound to create a technology that will amaze customers. In such an age when India is considered to be one of the fastest growing economies in the world, why should India be bereft of witnessing such a transformation in technology?

The most prominent argument that the Opposition is riding on is that entry of such global players in the retail arena will kick out small retailers and famous “kirana stores”. This argument is baseless as I can think of one comparison that will make this clear. Entry of four wheelers into the market does not kick out the two wheeler market. This may sound a very crude comparison, but this is how I justify it. Big retailers and small retailers are entirely different concepts, and they both cater to different markets. People buying from malls also buy from kirana stores, the main reason being they are fundamentally different concepts of retailing.

Shopping in big malls is considered to be a one-time thing, with urban families going once every weekend or fortnight to buy essential and “non-essential” items. Yes, non-essential items, because a trip to a retail mall always brings in many extraneous items along with the essential ones (accept many families). These trips sometimes are also considered an outing or an experience rather than an absolute necessity. While the kirana stores offer customer satisfaction by giving a personal touch, they also offer home delivery, and offer credit facilities also. They are considered a necessity while malls are not, no one would like to drive 2-3 miles just to buy a loaf of bread. Kirana stores deliver items when urgency is a criterion. Also, in such busy professional life, every one would like to buy things on the way home. In such a scenario, kirana stores have still a long way to go.

One thing that amazes me is why don’t players like Big Baazar, D-Mart or Reliance oppose this move. Because they cater to the same market the big foreign players cater to. If Wal-Mart or Tesco or Carrefour enter Indian market, these are the ones who would be sharing the markets. Any customer after deciding he wants to buy a car would choose between Toyota Etios or Maruti Swift but he definitely won’t be making a choice between Bajaj Pulsar and Maruti Swift. In the same way, whenever a customer wants to go shopping in a mall, he will choose between Wal-Mart or Reliance Mart, creating competition to the big Indian players already present in the market. It is surprising to see why no politician is addressing this issue, perhaps because by addressing small retailers they want to win the votes of those people who think their logic is correct.

Either I am missing some issue on this point, or either the whole economy is shrouded by political debates alone. In my opinion, no market should be restricted, Darwin’s theory of struggle also applies to this space. Let the toughest player survive. Opening the market in 1991 has transformed the entire economy, and this is one thing we should thank Congress for - opening up the market. It is trying to do the same thing now. In such economy when inflation is not easing despite million efforts by RBI, why not give a little chance to these players as well. It won’t in any way harm the current prices, that is for sure. Lets all take one step ahead, together.

Why US is a Leader

Recent US debt crisis raised many questions in my mind. What is debt? What is credit rating? What happens if US defaults? As I was finding the answers to this questions, I got to know more about why US is the world leader today. It had $14.7 trillion GDP in 2010 - an unimaginable amount. It accounts for a quarter of the global GDP. It is a net exporter of food and food items and it controls almost half of world grain exports. Manufacturing occupies a very small portion of US economy as compared to other countries. Yet it is the world’s largest manufacturer with industries like petroleum, steel, automobiles, construction machinery, aerospace, agricultural machinery, telecommunications, chemicals, electronics, food processing, consumer goods, lumber, and mining. It produces approximately 21% of the world manufacturing output, a number that has not changed since the last 40 years!!! Apart from that, the total monetary evaluation of New York Stock Exchange is $10.1 trillion (as of 2008), more than three times from the second biggest stock market - the Japan’s Tokyo Stock Exchange.

Apart from this, the median income of a US household in a year is a staggering $53000! That is huge. Compared to other countries, the US is way ahead in quality of life and per capita income. There is law and order in the country. Police is modernized. They have social benefits and health insurance plans like no other country in the world offers. Truly, the Great Migration in the early 90s to the US was justified.

I kept wondering what was the reason behind such huge success. And then as I kept reading, I came to know. The reason behind it all is one word embedded deep within the visionaries, technocrats and reformists of the US - Innovation. US leaders always encouraged innovative practices. As a fact, the United States has been the birthplace of 161 of Britannica’s 321 Great Innovations, including items such as the airplane, internet, microchip, laser, cellphone, refrigerator, email, microwave, LCD and LED technology, air conditioning, assembly line, supermarket, bar code, electric motor, and ATM. US is home to 30% of world millionaires and 40% of world billionaires, and there are 29.6 million small and large businesses that run in the US. Surely, innovation and business go hand in hand. Who would imagine a world without Apple, Google, Microsoft, IBM, General Electric, General Motors, Ford etc. These companies drive the world today.

The data left my mouth open in wonder and amazement. And shocked too. Because in Britanicca’s list, we have only 1 Indian. Since I am a patriot, I felt jealous. So I read more to determine why are the success stories in US based on innovation. The answer was obvious - quality of education in the US. Education system in US a very well-organized system. It is controlled and funded at three levels - Federal, State and Local. And as soon as a child enters middle school in the 4th or 5th year, he/she is given option of choosing subjects based on his/her interest. The subject vary and every discipline is available for study. They have a comprehensive grading system ranging from D- to A+. Apart from this, there a lot of extra-curricular activities that students participate in. Attention is given to all round development. In short, it is a self-sustaining system. And even the college education in the US is world class - we all know it - Purdue, Yale, Harvard, MIT - these are dream destinations for students worldwide.

Compared to US, education in India is far behind. Though we are a very young nation compared to the US, (US gained independence in 1776 and India in 1947) and India has an education system that invites the envy of many countries - we can still do better. At the college and university level - we are almost there, with world class institutes like IIMs and IITs breeding a young talented pool of people every year. But we need to improve education at the grassroots level.

What I remember about my school years is - importance was given only to getting high marks in the examination. Learning subjects and writing on paper, I have never done any project in my school time - a harsh reality. Although the education system is changing in the recent times, I still see much focus given only to cramming up things and getting high marks. An above average student, with excellent marks throughout the school, and studied in IITs and IIMs is not capable of doing innovation. A world class job and business - yes, but innovation - no. India has not invented anything.

There is very low scope for R&D in India, every science student is opting for engineering (including me) - no one takes Sciences. The reason: our education system doesn’t encourage innovation. We are taught so that we can have a degree and earn money in life. So we follow those jobs which are demanded the most, with no respect for our aptitudes and interests. Our IT companies do nothing but outsourcing. We do the the less brainy jobs, all the intelligent decisions are taken in the US. What Indian Software Engineers do is that they substitute US engineers for a fraction of a cost so that they can be engaged in a more fruitful and demanding job - one that requires lot of ‘out-of-the-box’ thinking and innovation.

India needs to wake up to this reality. Encouraging innovations is the only way to be a world leader. We have missed out many things, it is time we board the train and don’t miss out the future. I am neither a US fan nor a India critic. All I am saying is that they have something which is better, which we need to think about.

The Silent Issue

It’s been more than a year since I have “blogged”. Well, I accept I am not an active blogger, but this issue specifically compels me to pen down my thoughts and vent out my frustration in Times New Roman.

Since January this year, all I have been hearing is Corruption, Anna Hazare, Lokpal. It seems like Rs. 1.76 Lakh Crore is giving jeepers to the Indian civil society and the activists. I think the attempt by Kapil Sibal and PM Manmohan Singh to expose the futility of this attempt is by rolling out a statement like “The Government exchequer has not lost anything by the 2G scam spectrum”. That statement seems a little far-fetched, but the fact, in my opinion, remains is that magnitude of efforts going in the case is futile. Especially when we know that the money is not coming back. Punishing the guilty for such heinous crimes is one thing, and politicising this issue on a national platform is another. Of course when the issue comes to coalition politics, there are bound to loop holes.

Of course, there is the media then. How else would we come to know what’s happening in that big
large red house in Delhi? TOI had a page dedicated to Lokpal for 2 weeks when Anna had gone on fast for the first time. Thousands joined, millions voted and SMSed (even gave a miss call). We were the innocent sheep for the media. I don’t blame them though, after all, it’s a business. They need to have something to feed us and in-turn feed their employees.

But, there is another pressing issue, silently creeping into our daily lives while we remain focused on Rs. 1.76 Lakh Crore. The issue is – rising costs. I have purposefully not termed the word as “inflation” because then I would find people saying that is in the limelight. When I entered my college 4 years ago, the Orientation Programme mentioned that Engineering students in Nirma get an average salary Rs. 3.0L p.a via campus placements. 4 years have passed, I landed with the same amount, and with me another 400 (approx). But in these 4 years, I have noticed the average price of Regular Gujarati Thali going up from Rs. 35 to 50, a price rise of 43%, Nirma fees going up from Rs. 27500 per semester to Rs. 73000 per semester, a price rise of 165%, average price of a 2-BHK in Ahmedabad (and many other cities) going up from Rs. 16L to Rs. 40L, a price rise of 150%. And the list goes on.

We have a 7.5% GDP growth on average for the last 3-4 years then why isn’t my salary increasing? Why does the cost always rise? The answer lies here: the GDP growth occurring in India is due to the top 0.2% of people, the industrialists, Tata, Ambanis, Adanis etc. Their revenue is increasing, but is that getting reflected on the salary? The salary hike is 10-12% once in 3 years, which is not enough to battle the rising costs.

The point I am trying to make is – I would be happy to rally myself for a fast that focuses on this issue, and with me may be another millions, because corruption, on an average, pinches lesser than the rising costs. The youth today needs to open its eyes to the reality today – is the GDP growth an overall one or a per capita one? It is true that India has the second highest growth rate in the world, but in terms of per capita, we lag far behind.

The power of democracy lies in the hands of people, and the primary function of the elected representatives should be prosperity of the nation. If these two facts are accepted true, well then, the government, the civil society, the media and the corporate honchos need to focus on this issue as well. That is all I have to say.