India's retailers, farmers face uncertain future
MUMBAI, India—Ashok Kokane sits amid his strawberries at Mumbai's Crawford Market with a handwritten ledger across his knees and a fan of dirty 10-rupee notes at his left hand. Above him, torn tarps speak of worn out effort. The lazy, dust-encrusted ceiling fans are far past cleaning. There is a sense of timelessness here, in the lurking cats, the shiny shrine to Durga -- a fearsome Hindu goddess -- and the cry "Porter? Porter?" sent up by skinny boys with frayed flat baskets on their heads.
It is a tableau many fear will disappear in the wake of the government's decision last week to give foreign companies greater access to India's huge retail market, paving the way for companies like Wal-Mart to open supermarkets in urban centers.
"When big man comes, small man goes," Kokane said.
The arrival of modern retailing would hasten a cultural transformation in the way Indians shop and work. The debate now raging -- which has shut down Parliament and may rip apart the ruling coalition -- hinges on competing visions of what foreign retailers will bring for India's two largest sources of jobs: agriculture and retail.
Some believe organized retail will make food more affordable, liberate millions from medieval working conditions and put more money into the hands of desperate farmers. Others say it will deepen the inequities of Indian society and wipe out a merchant class whose values and skills have been passed from father to son for generations.
The existing retail landscape is an intricately evolved tangle of shops and bazaars, which has been forged by ideas that date back to India's earliest religious texts. Whether Wal-Mart takes India by storm or not, traditional retailing is already being weakened by fraying caste ties and migration. Small, family run shops may vanish in a few generations as empowerment and ambition draw India's rising youth into better paid, more prestigious jobs.
"You have different sets of people who because of the caste system have been involved in the same business for many generations," said Arvind Singhal, founder of Technopak Advisors, a New Delhi based consulting company. "If you are rude or not service oriented, you could be ostracized from the community itself."
These days, he said, "A shopkeeper's son may not be a shopkeeper."
Today, organized retail accounts for just 5.5 percent of India's $470 billion retail market, according to Technopak. Food accounts for about 70 percent of the retail market, which Technopak expects will hit $675 billion by 2016.
Existing domestic supermarkets, like Reliance's Fresh, Godrej's Nature's Basket and Tata's Westside, have struggled to succeed on their own.
"The traditional retailer in India can offer better value than some of the large, organized players," Singhal said.
India's existing supermarkets often sell, at exorbitant prices, rotten dairy goods, pasta infested with bugs and icy $12 a pint Haagen Dazs ice cream which has thawed and refrozen an unknowable number of times.
Stocking irregularities inspire shoppers to sweep up those last five cans of Italian plum tomatoes, because they might not be found again for a month. You may have to put back that jar of capers because the clerk can't figure out how to get his computer to register the bar code.
In contrast, the best local shops are marvels of service and quality, bundled with a nice human touch. If you're short money, no problem, pay next time. If you want a fistful of flat-leafed parsley or a special pan, well, that can be acquired in a day or two. Every organized urban household has a raft of phone numbers, which at the touch of a finger can bring cat food, toilet paper, chickens and pretty much anything else to the doorstep.
India's market and roadside stalls employ, at backbreaking rates, armies of slim men, who pedal rusted bicycles stacked improbably high with gleaming eggs for delivery. They run up and down dark staircases offering soft fresh rolls wrapped in newspaper and cart cases of Bisleri water atop their sweating heads two and three at a time.
"No one benefits from this kind of employment," Singhal said. "People are hardly getting money for those jobs." Far better -- and cheaper for the retailer, he argues -- to hire one well-trained, decently paid person than five poorly paid workers and spur a virtuous cycle of rising productivity and increased consumption.
Many argue that retailing in India is not yet a zero-sum game: Demand is growing fast enough that big and small players can thrive side by side. The Ministry of Commerce noted that in China, over 600 hypermarkets opened between 1996 and 2001 but the number of small stores grew too: from 1.9 million to over 2.5 million.
The Ministry of Commerce predicts that modernization will create some 10 million new jobs in areas like food processing and transport, as well as in new retail outlets themselves. They say the new regulations will drive down food prices and help millions of farmers get more money for their crops by eliminating wastage and middlemen.
But advocates like P. Sainath, who has been writing about rural India for 18 years, say few farmers will benefit. Big retail, he argues, won't heal the inequities of rural India which have driven thousands of farmers to kill themselves since 1995. If anything, he said, it will make them worse.
"One to two percent of farmers -- some possibly members of Parliament -- will make a killing. They are the giant farmers," he said.
Big companies tend to build on existing chains of exploitation, using wholesale agents who extract low prices from unorganized, indebted farmers, whose pricing power will erode further with multinationals, he said.
Many middlemen, he added, are actually poor women, unlikely to survive the arrival of supermarkets.
"The middleman at the city end is usually a poor woman vendor who carries up seven flights of stairs 35 kilograms (77 pounds) of produce on her head," he said. "Every day it's getting more difficult for her to get produce because the wholesalers sell directly to Reliance Fresh and Godrej Nature's Basket."
Even when big companies contract directly with local growers, opportunities for exploitation remain, he said. A company may stop paying the agreed upon price after a few seasons, leaving the farmer stranded with debt and a crop he can't sell elsewhere.
"You have no idea of the chaos you are unleashing," he said.
Reza Meghani, who runs Metro Dry Fruits -- a small stall that has been selling some of the Mumbai's best dried fruit and nuts for 22 years -- believes he will survive the changes.
"We can compete. We will have to compromise on our margins," he said.
Meghani, 56, is grooming his son to take over the business. He takes comfort in the fact that Mumbai's existing supermarkets haven't hurt him. They have higher overhead, compromise on quality and charge too much, he said. They certainly can't compete with the tenderness with which he discusses the eight varieties of almonds he imports from America and Iran.
Neha Sheikh, 23, says her family has been shopping at his stall for a decade. "The salesperson is really good," she said. "He's going to help you out in every little thing." She won't buy nuts from a supermarket like Nature's Basket because they're too expensive.
But if they were cheaper? "Yeah," she said. "Why not?"