Domestic Retail Market in Foods needs a Push!

Organized retail market constitutes to only 5% of the total retail market size in India, valued at about US$ 435 billion and organized retail is focused only in the metropolises. Food inflation has not climbed down much from the high of 18.33%; besides being marginally less by 3-4% – especially, when there is criminal waste of food due to lack of integral storage and wide gaps that are not bridged in the value chain. It is clearly evident that the government is lost and is not able to find a solution to control the spiraling price rise, adversely affecting basic/ daily consumption of vegetables like Onions.

Of long, we have been protecting the Indian retail market, reasoning that we do not wish to make India, a dump-yard for inferior/ cheaper Chinese products, keeping in mind, electronics in particular. But, let us look at the lacunae we face in our food distribution chain. There is not much ‘distribution’ development in the rural Agri-markets. The cost of transportation can be reduced by cutting down few layers as well as widening the consumer reach to supplies. Prices hugely jump from farm gate to retail market by 200% in basic vegetables like Onions. If this fact is highlighted to the finance minister, he diverts the public focus, with new statistics that enumerate only egg/ milk products as major contributor to the rise in food inflation.

There is a sense of ‘Chalta hai’ (meaning ‘life just goes on’..) attitude in the policy makers’ minds, who determine methods to arrest progress in food inflation. There is a huge scope which is not yet tapped, to encourage FDI (Foreign direct investment) in the Indian retail market for Vegetables. Surveys on emerging markets say that domestic demand-driven India is a good destination to invest in retail. This (Import) is happening when fruits are being considered, with Apples (from New Zealand), Pears (Austria), Plums, Mangoes, Kiwi fruits (Italy) etc.

One could call it ‘fruits’ of globalization. Although they carry a hefty price tag because of low volumes, fruits from across the world have made it to the neighborhood vendor as people are willing to pay for the imported variety. Fresh green kiwifruit from New Zealand and red globe grapes from California are gradually becoming popular in the domestic market,’ say experts in the trade.

“There is good demand for kiwis from Italy, as they are available from October to March, a period which coincides with the marriage season,” said Ambrish Karwat, chairman, Yuppa group, an Agro-produce company which grows, imports, markets and distributes fruit in India. “We imported 250 tonnes of kiwis and 100 tonnes of red globe grapes last year.” Kiwi has been imported into India primarily from Australia, New Zealand and Italy since 1996. “If we compare the prices of imported fruits to its domestic siblings, there is a huge gap with Indian farmers slowly and steadily bridging the demand,” he said. (Source: “Imported Fruits are a hot pick” from Economic Times)

Indian kiwi fruit, now being grown in Himachal Pradesh and Manipur, retails in the local market at Rs 150-180 whereas when imported from New Zealand or Australia, it costs Rs 200-250 per kg. Definitely, competition is the mother of invention in this case, with indigenous techniques being adopted. By opening up our retail market, we can arrive at better trade standards, uplift consumer care and attention to them. In effect, the market size is bound to grow as new buyers are identified. I am of the opinion that FDI should be used as a tool to improve Indian market producers’ standards in vegetables and fruits. There should be a run for the profits and the consumers/ buyers be provided a multiple choice. In effect, domestic players will enable themselves to be global players, adding more business and profits.

In other emerging countries such as South Africa, Kenya or the Middle East, 100% FDI retail markets are already established since long time. Even China opened up in the year 2004; deep-pocketed big retail chains and the corner (like ‘Kirana’) shops have co-existed and prospered. Why not this model is adopted quickly/ on time in India to contain food inflation like we face in the present times, as well put into practice ‘global means’ accepted worldwide? Demand-Supply fluctuations have contributed to be only speculation and unfair gains amongst Indian Agri-producers and the entire value chain. This ‘bill’ is finally paid by the consumers, who has not much of a choice, thanks to ‘slow-down’ policy makers working on ‘globalization’, in the Indian government. In effect, the Agri sector is largely underdeveloped, corrupt and not conducive to meet the global standards. It is assured, Mom and Pop stores or the kirana shops will stay, despite globalization, due to ‘binding’ customer relationships built by them over a long time and these shops are locality specific. I do not feel, FDI in food retail will affect adversely local produce rather than enabling growth of the sector.

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