FDI in retail

Retail sector is one of the pillars of the Indian economy which accounts for nearly 22% of the GDP of the country. The retail sector in India can be classified as: Organised sector and unorganised sector.

Organised sector refers to the retailing activities undertaken by licensed retailers, or put in simple words activities undertaken by those retailers who have registered themselves for sales tax, income tax, etc. On the other hand, unorganised sector refers to the mom and pop stores or the kiraana stores.

The retail sector is a whopping USD 400 billion industry in the country with the organised sector growing at an annual rate of 35%. However, the organised sector in India does not even account for 10% of the retail industry. This is particularly because of the government rules and regulations which does not allow 100% FDI.

The government has recently proposed to allow multi-brand foreign retailers a 51% stake, while a 100% stake in case of single brand retailers in India.  This will attract foreign retail biggies like Wal-Mart. Tesco, Carrefour, etc. to India. However, there is a long ongoing debate on the viability of the proposal. Here’s a small analysis.

The major concern, as pointed out by the opposition party and many others, is the fact that the full-fledged entry of big players like Wal-Mart may significantly have a negative impact on the unorganised retail sector.  India has the highest shopping density in the world with 11 shops per 1,000 people. It has 1.2 crore shops employing over 4 crore people and nearly 95% of these are small shops run by self-employed people. Entry of the big players will negate the importance of these shops, as in case of the developed countries like the U.S or Canada and displace the shopkeepers and lead to unemployment. In countries like U.S.A you can only find supermarkets, hypermarkets, and other big multi-chains. It’s not the same as in India where you walk down for 2mins and find a kiraana waalah stocking necessary items for you. You may have to drive long for acquiring necessary items.

Well, honestly, I don’t find the argument quite convincing. We already have players like Big Bazaar, D-Mart, etc. The same argument was put forth when these domestic players were allowed to enter into the market. However, what we noticed was that there merely was a shift in the buying pattern. A person would walk down to Big Bazaar or D-Mart only to buy consolidated packs or when the person has to make multiple purchases. When it comes to small purchases, people still walk down to the kiraana stores. Will you go to Big Bazaar to buy a Rs.5 Maggi pack or a Dairy Milk? Of course not! Therefore you mostly find consolidated or large/bulk packs at such outlets. Not only do these small shops have locational advantage, but also they can provide some extra facilities which supermarkets and hypermarkets cannot provide, viz. Credit facility, home delivery on small purchases, personalised selling efforts, etc.  And competition is no excuse for not allowing FDI. If competition is a valid excuse, government should even accept Mallya’s plea for bailout. So the fear of small shopkeepers getting displaced is vastly exaggerated. When domestic majors were allowed to invest in retail, both supermarket chains and neighbourhood small stores coexisted and still coexists.

Secondly, it is true that some jobs may dry up, but on the other hand a lot of job opportunities will be created. Big retails will hire a lot of people. Moreover, the policy mandates a minimum investment of $100 million with at least half the amount to be invested in back-end infrastructure, including cold chains, refrigeration, transportation, packing, sorting and processing. This will create a lot of opportunities in logistics management. Also, sourcing of a minimum of 30% from Indian micro and small industry is mandatory. This will encourage domestic value addition and manufacturing, thereby creating a multiplier effect for employment, technology upgradation and income generation. So in short, huge investments in the retail sector will lead to gainful employment opportunities not only in marketing and front-end retail but also in sorting, manufacturing and logistics management. At least 10 million jobs will be created in the next three years in the retail sector.

Now the other major concern today in front of the country is the escalating inflation. Entry of the biggies will help in curbing inflation. Firstly, the role of exploitative middlemen will be eliminated which will give good returns to the producers, and at the same time retailers will be in a position to provide it to the consumers at a lower price. Secondly, presently nearly 30% of the food grains and over 50% of the perishable items like fruits and vegetables are lost due to inefficient and inadequate storage, cold storage and transportation facilities. Mandatory investment of $100 million will again prove to be immensely beneficial, although this essentially is the responsibility of the government.

Next argument put forward by the opposition party is that Global retail giants may resort to predatory pricing to create monopoly which may result in essentials, including food supplies, being controlled by foreign organizations. However, there is a strong legal framework in the form of the Competition Commission to deal with any anti-competitive practices like formation of cartels. And hence, this argument is baseless.

In principle, governments should not prevent anybody, Indian or foreign, from setting up any business unless there are very good reasons to do so. Hence, unless it can be shown that FDI in retail will do more harm than good for the economy, it should be allowed. But multi-brand retails like Wal-Mart, Carrefour, etc. may face hurdle in 28 of 53 cities opened for FDI. With BJP, JD(U), AIADMK, BSP and Trinamool Congress strongly opposing FDI in multi-brand retail, global chains may face problems in opening stores in 28 approved cities.  

What we must not forget is that Competition is the only force which urges any organisation to perform in the best possible manner and offer the best quality products at the most attractive prices.

Cost of Corruption

Corruption is a deep-rooted menace which is prevalent in the Indian society and has decomposed the values of our society. Sadly, there is hardly any sphere of social, economic, political or even religious activity which is free from corruption today. It has become so common that we have started accepting it as a part of our everyday lives. It is one of the “necessary evils” of our society, necessary because we cannot really abandon it completely and yet get our work done.

Corruption in the form of embezzlement, nepotism, bribery, and cronyism is present in the Indian society. By all objective criteria, India today has by far one of the most corrupt governance in the world.  Political and bureaucratic corruption in India is a major concern. A 2005 study conducted by Transparency International in India found that more than 45% of Indians had first-hand experience of paying bribes or influence peddling to get jobs done in public offices successfully.

So let’s see what’s the cost of corruption?

The establishment of a company needs a lot of documentation. For this almost everyone has to pay bribes, else the documentation process is delayed for a very long time. For undertaking the production process, the company needs various licenses which can again be obtained after paying extra money under the table to the corrupt officials. If one fails to pay extra sums of money for essential inputs like water and electricity, they cannot avail 24hours facility. For the approval of any major projects, bribe is an absolutely inevitable element.  If you get in touch with any production unit, you’ll get to know that you have the excise officer, pollution officer, BMC officer, Sales Tax officer, Income Tax officer and various other officers come on rounds. And they all have to be paid the demanded amount each year. Again, the transportation process is also not free from corruption.

Transparency International estimates that truckers pay US$5 billion in bribes annually. In 2010 India was ranked 87th out of 178 countries in Transparency International's Corruption Perceptions Index.

So who do you think really pays these extra costs? Are the companies giving up on their profits? Nah! We, the end consumers, are the victims. The price that you pay for each product that you buy, right from your cold drinks to snacks to even vegetables, is composed of five elements – cost of production, cost of marketing and selling, taxes, profit margin, and cost of corruption. Or in other words,

Price = Cost of Production + Cost of marketing and selling + Taxes + Profit + Cost of corruption

The price of input raw material increases as the supplier too has to bear the same corruption cost.  And this is a vicious circle. It is estimated that nearly 70 %( including the tax paid) of our income goes in the pockets of our corrupt babus.  We shell out nearly a rupee or two from every Rs.20 that we spend on purchasing goods as corruption cost. Now this is the cost that we individually pay for corruption. Let’s look at it from a bigger perspective of the Indian Economy.

Do you know that the flower vase in all government offices has a book value of 30cr Rs? Shocked huh? The machinery which is imported for, let’s say 1cr, is purchased by the government for Rs.10cr. This includes the money absorbed by the middlemen and, of course our babus. These purchases are out of the same money that we pay as direct and indirect taxes.  This is exactly what the CWG scam and Chara Ghotala is all about – inflated bills,

Decisions taken for corrupt motive sub-optimises the allocation of scarce national resources and hence in the long run, it lowers the rate of growth in GDP. It also encourages buccaneers and robber barons to flourish instead of innovative entrepreneurs. Most businesses find way to other neighbouring countries like China which affects the GDP of the country. Technology and inventions do not find way to our country because of the same corrupt babus who look at technology and inventions as a means to fill their pockets.

Money earned by accepting bribes escapes the tax net and is mostly stashed away in Swiss Banks or kept safely in houses. This then becomes the so called “Black Money”. One of the reason for the unreasonable and unjustified response of the government to Baba Ramdev’s Satyagraha for getting Black Money back to the country was the fact that huge sums of their own money is parked in tax havens. This black money is deployed in luxury goods purchase, ostentatious life, splurging in five star hotels, real estate, and on partying.

Participatory notes(PN), instruments used outside India for making investments in the stock markets is one of the tools terrorists use to fund their activities. In his address to the 43rd Munich Conference on Security Policy on February 11, 2007, MK Narayanan, the National Security Advisor to the Government of India, listed out the various ways by which terrorist activities in India were funded. Instances of terrorist outfits manipulating the stock markets to raise funds for their operations have been reported. Stock exchanges in Mumbai and Chennai have reported that fictitious or notional companies were engaging in stock market operations. Some of these companies were later traced to terrorist outfits. Thus, the Government of India is well aware that terrorists are parking funds in Indian ventures. Yet the Finance Ministry has nothing to do about it. The terrorists are using our money to attack us.

In India, the corruption has also crept into religious institutions. Some of the Churches of North India are making money by selling Baptism certificates. The TI India study estimates the monetary value of petty corruption in 11 basic services provided by the government, like education, healthcare, judiciary, police, etc., is around INR 21,068 crore (US$4.7 billion).

The finding from an eight-city survey done exclusively for TOI reveals that corruption is a major threat to the economic development of India. 

So how can we fight against corruption?

The Right to Information Act requires government officials to furnish information requested by citizens or face punitive action, and has also led to computerization of services. This has opened up avenues to redress grievances. So we can make use of this to keep a check on the practices of government. What is needed on our part is constant vigilance.

Organisations like Lokayukta should be supported and promoted. It should start functioning efficiently like Hong Kong's Independent Commission Against Corruption (ICAC). Hong Kong of 1960s and 1970s presented a picture quite similar to present-day India. Even though industrialisation was at its best, governance was at its lowest ebb. There was no proper infrastructural development. Corrupt entrepreneurs and contractors found the backdoor easy route to get their work done. However, Hong Kong transformed itself into a bastion of transparency. They established an anti-corruption agency, the Independent Commission Against Corruption (ICAC) which uprooted corruption from their economy. Today, Hong Kong has become a top destination for multinational companies due to the environment of transparency that prevails there. India surely needs to follow the same path.

Thirdly, Whistle blowing should be promoted in the country. Whistle blowers should not only be rewarded for whistle blowing but should also be protected.  India currently does not have a law to protect whistleblowers, which was highlighted by the assassination of Satyendra Dubey. Whistle Blowers play a very important role in fighting against corruption.

I’d like to leave you with a thought – Are you really indifferent about the fact that you are slogging to ensure a lavishing lifestyle to the corrupt babus?

Woman Of Substance – Is it merely a creation of the glamour seeking media??

We live in a highly male dominated society. For centuries, women have been victims of social prejudices and discrimination, especially in the Asian Countries. They are generally presumed to be weak, passive, dependent and people-oriented and are hence confined to the four walls of the houses. In such countries, marriage is the only career for most women. This is because women suffer from male reservations about a women‘s role, ability and capacity and are treated accordingly. While in most other countries, average earnings of women are lower than those of men. Women have confined their activities to selected professions such as education, nursing, medicine and office work.

Women constitute almost half of the total population in the world. But their representation in gainful employment is comparatively low. According to an I.L.O. report in 1980, ―women are 50 percent of the world‘s population, do the two thirds of the world‘s work hours, receive ten percent of the world‘s income and own less than one percent of world property.

 However, in the recent times, women have made impressive strides in the corporate world. Today we find women at various levels in an organization, even in the top level management. Women are making waves not only in business but also in politics and various other professions all around the world. Their influence is growing substantially.

But the real question which arises is – Are they really that influential, consistent, strong as they are portrayed to be by the glamour seeking media? Can we really call them woman of substance? Or is it that the media is merely plugging for such women to gain a couple of more TRP ratings?

Was Kalpana Chawla, one of seven crew members killed in the Space Shuttle Columbia disaster not as brave as she was portrayed to be? Of course she was! She had the courage to follow her dream. Well, I believe media has no take in this case. We really do have such strong and influential women in today’s era. In-fact I’d say they are nowhere behind their male counterparts.

Here I take a few names! Mother Teresa, Eleanor Roosevelt, Indra Nooyi, Sudha Chandran. Ever wondered what’s common between all of them? Firstly and very obviously, they are all women. Secondly, they are all successful personalities. They overcame hurdles in life, and yet managed to clinch triumph. Mother Teresa spent her entire life unconditionally serving the unfortunates in India. While Eleanor Roosevelt, the first Lady of the US, worked to enhance the status of working women. Sudha Chandran is a lady who with her artificial wooden is still considered as the best BharatNatyam dancer in the country. Indra Nooyi is an Indian who made a long way in becoming the C.E.O of PepsiCo. She’s today considered one of "The TopGun CEOs" by Brendan Wood International, an advisory agency.

Let’s now talk about Mrs. Indira Gandhi. Indira Gandhi was an influential leader. She is certainly “the symbol of FEMINISM” in India. As per the economic surveys, when she became the Prime Minister, 65% of the country was below the poverty line and when her regime ended it went to 45%. Food Production increased by 250% and literacy increased by 30% during her tenure as PM.  And then, can we deny the fact that the goodwill she earned amongst the rural population of the country still has its effect on the success of the Congress in rural India? She is still remembered as “Amma” there. Her “Garibo Hatao” Slogan is still used by the Congress. Sonia Gandhi tries to resemble her. And No it’s just not a so called Media Hype. But Indira Gandhi is genuinely an exceptional example of a woman of substance. And let’s not forget even she comes from a highly male dominated Gandhi family!!

 “Woman of Substance”, is no longer a philosophical concept. It is a reality!! And Media, by no chance, are plugging for such eminent women.

Morcha on Mumbai - Nasik Highway

These are few click... had no other option but to wait for the protestors to pass by...They blocked the entire road... This is near Kasara (10 - 03 - 2011 at 6.35pm) Mumbai- Nasik Highway (NH3). Had to take the old highway !!!

Hundreds of protestors on the road.. They're moving to the Bombay High Court I suppose ..

 

 

 

The same protestors at Shahpur while returning back to Mumbai (12-03-2011 at 10.15am)

 

hell loadsa traffic due to the Morcha on the national highways !! Wonder how long they'd take to reach Mumbai !!

Patience- An Antediluvian Virtue???

Patience is one of the most valuable virtues propounded by various religions, for years together now. In Quran, Patience has been described as one of the most indispensible virtues of life. Muslims believe that, through patience, an individual can grow closer to the Almighty Allah and thus attain true inner peace. It is also stressed in Islam, that Allah is with those who are patient, more specifically during sufferings.

Let’s now talk about other eastern religions like Hinduism and Buddhism. Both, Hinduism and Buddhism, place a great deal of emphasis on meditation and yoga which is believed to help an individual integrate his mind and soul, which ultimately helps an individual attain “Akhand Ananda” or true bliss. Patience is described as one of the most important and indispensable factors for the growth and development at any stage.

Coming to Judaism and Christianity… Patience and fortitude are prominent themes in Judaism. The Talmud extols patience as an important personal trait. In the Hebrew Torah, patience is referred to in several proverbs.

Increasing patience is viewed as the work of the Holy Ghost in the Christians who have accepted the gift of salvation. It is one of the seven virtues, alongside chastity, temperance, charity, diligence, kindness, and humility.

“Patience is the companion of wisdom.”  Saint Augustine

Sounds too idealistic! Isn’t it? The real question that arises in today’s highly competitive scenario is - Can we really afford to be patient? Ah C’mon! Life is hardly like a life now… It’s a Race! If you’re not quick, you’ll have to experience a failure! It’s like asking a person who has participated in a race to run slowly! Can you manage winning a race with patience? The answer is a BIG YES… This is exactly where most misinterpret the meaning of patience! Patience means maintaining the state of endurance in difficult and competitive situations. It does not necessarily mean doing things slowly. So you can still be quick while you’re patient, but just means ensuring that you are not doing things haphazardly.

Now we will look at the importance of patience from two perspectives – importance of patience in our day-to-day lives and importance of patience in the corporate world.

Patience is something which will help an individual stand up after s/he has had the greatest fall in life. Patience gives an individual the courage and determination to walk towards the goal irrespective of the failures experienced in life. People who are impatient give up easily and are ultimately the victims of depression, and mostly if not always, they blame their destiny without even realizing that they themselves are the culprit.

We can look at patience as a long term process. Patience ensures that an individual achieves the long term goal, even if it means facing difficulties and failures in the process. What you need to understand is that you have to stand up each time you fall down; improve yourself and your plans continuously till the desired goal is achieved.

In evolutionary psychology and in cognitive neuroscience, patience is studied as a decision-making problem involving the choice of either a small reward in a short span of time, or a more valuable reward after a long period of time. Patience is very important when it comes to making crucial decision related to life. Any wrong decision can lead to a chaotic situation in a person’s life. It is equally important in the corporate world.

Decision making, as we know, is the heart of businesses. The success of any business depends on the decision making ability of the concerned individuals. Any wrong decisions can prove to be detrimental for the company. Patience ensures that the concerned individuals take into perspective all the angles and possible outcomes of the decision so taken.

I’d come across a person who wanted to make an innovative product- spectacles with camera. The product most definitely is innovative, but deep thinking can give you the answer that it can never be successful. You are not allowed to take cameras inside exam rooms, some temples and various other places.  Companies hastily taking decision without conducting MR are more prone to failure. Hence, an impatient decision maker is actually undertaking more risk. We, undoubtedly, have to thrive in this highly competitive corporate world but decisions taken haphazardly can actually work negatively.

Last but not the least, you must have the patience to wait for the correct opportunity and time to come and knock at your door. You’ll always find one- sooner or later! Like for instance, if you’re an entrepreneur trying to enter into a highly competitive market, you will, most definitely, not be able to enjoy a sizeable amount of market share initially. But if you’re adamant that you want to enjoy the lion’s share, you need to be patient. Don’t forget that your competitors enjoy both, goodwill in the marketplace and customer loyalty, because they’ve been in that business for a couple of years. And drawing such loyal customers towards your product is a time consuming process. And then, expertise and customer loyalty is something which builds over time. So patience is inevitable.  As they say, a man who is the master of patience is the master of everything else.

Patience was, is and will always be one of the most important virtues of life. Patience will ensure that victory entwines its wings around you in the long run. Patience is a mechanism which will help you metamorphose your vision about life into a reality. Life is a long race and failures are part and parcel of life. Nothing is permanent! Just be PATIENT and things will fall in place!!

“He that can have patience can have what he will.”

- Benjamin Franklin

MBA - Propitious or Dogmatic ?

Is MBA really a prerequisite to get a job of higher responsibility, great glamour, or a good package?? Is it a good substitute to the kind of practical knowledge that one would have been exposed to in those two years spent in gaining the theoretical knowledge?? Or is it that MBA's make better managers or business leaders, and most importantly always succeed in making a great career and a great future?? The debate as to whether MBA is really helpful or is just a trend followed by students is a debate that continues furiously in India.

MBA, at its best, is a degree which ensures that an individual is well versed with the basics of Management concepts. It has gained a lot of importance, now-a-days, due to its expensiveness and the academic and entrance test barriers which allows only nearly 5-10% of the elite students ( and I am talking about intellectual elitism) to make it to a good B-school.

The usefulness of the management education program is hard to measure and evaluate because we have witnessed extreme examples. When we take a look at the educational qualification of Dhirubhai Ambani, who was merely a matriculate; or Steve Jobs and Bill Gates, who dropped out of their colleges, we definitely cannot advocate MBA to be the only means of a successful career. Let’s talk about the legendary Peter Drucker. He does not come from a management educational background. Most of his management thoughts come from practical observation of the business in action as a consultant and researcher. The management principles and theories propounded by him are taught in the management schools. His managerial thinking is at least 30 years ahead as some of his thoughts were written in the 50's but are still recognized as indispensable for running a business.

At the same time, there are many IIM students you can find in your coaching classes. Are all of them teaching at such leading coaching classes because they have a passion for teaching? Is it? I don’t think one requires an MBA degree from such a reputed B-school to conduct lectures on percentages or number system. It is merely because they didn’t make a desirable career in the corporate world. I can find no reason why one would slog to get 99+ percentile for taking up a normal teaching job which is even taught by students who give 2-3 CAT attempts, scoring somewhere above 95 percentile, and are still trying hard to make it to one of the IIMs.

As they say, every coin has two sides. MBA, too, has pros and cons.

Firstly, to be eligible for getting an entry into the mid level management of some well known MNCs, one has to have an MBA degree specializing in the required field. So, an MBA degree would help you in your initial stages of career. However, after a couple of years, no degree certificate is helpful. It is your productivity and performance at your workplace that counts, in just the way as no one really cares for your SSC marks now.  

Secondly, MBA will help you get a theoretical base and hence you can relate to the things that you come across in the corporate world. Like for instance, tomorrow when you formulate a marketing strategy for your product, you know that you are supposed to incorporate the 4Ps of marketing as propounded by Neil H. Borden. However, you will soon realize that de-educating yourself is necessary to succeed. You’ll spend nearly a year de-educating yourself. This is because what you learn is too idealistic and does not necessarily hold true in the practical world. Corruption, in the form of bribery, extortion, cronyism, nepotism, embezzlement, etc.  is a major problem faced by our economy. But strangely our syllabus doesn’t cover the way in which one should deal with corruption!!  Isn’t that really important? Corruption is prevalent at almost all levels and almost everywhere. This is just one! There are many… and you’ll realize this once you enter into the corporate world.

Thirdly, MBA will undoubtedly work like a fast forward button. You will get the knowledge about the various terminologies and concepts used in the business world within a span of 2 years, which otherwise would take a couple of more years. Also, as a fresher you will get a better post than the ones who do not have the degree. But, what will pinch you hard is the fee structure. And then, even when you invest a few lakhs of Rupees for your MBA program, you cannot be certain of getting a good job profile with a good package in a good company. The lowest package is as low as Rs. 3 lakhs ( I am talking about a fairly decent B-school like Welingkar. )

Last but not the least, there are too many students from various streams like the Commerce Graduates, Engineers, Arts and Science Graduates, etc. who opt for MBA. Due to this, not only cracking the entrance test is difficult but also securing a job, after the course, is equally difficult. There are more than 3800 business schools in India (as per AICTE) offering two-year MBA or equivalent programs. On an average there are over 200 students in each B-School, which means a minimum of 76,000 students competing with you from all over the country each year. When the supply exceeds its demand, the price paid is always less. This again brings me back to my previous point of getting a low package.

Today, MBA is not just confined to Marketing, HR, Finance and Systems, but you can also specialize in Entrepreneurship, Family business, Defense, Advertising, Pharmacy and various other fields. In-fact, MBA is looked up as one of the essential factors giving a boost to entrepreneurship in the country. Studies indicate that the failure rate for small businesses started by an MBA student is 50% less than the standard failure rate.

Looking at the scenario in Mumbai alone, we have over 1, 00,000 fresh graduates each year and not more than 20, 000 job openings. And let’s not forget that Mumbai is a place where people come from various places across the country in search for a job and  a better standard of living. MBA will certainly help one have an edge over such freshers applying for the job. We can look at MBA as an entry pass for getting into big MNCs as a fresher at posts of relatively higher responsibility, which otherwise  usually takes a couple of more years, esp. when done from the top b-schools in the country and across the world. However, it is also important to note that probably a PGDM from IIM A will give you an edge over the ones graduating from some fairly decent B-school like Welingkar or MET in the initial stages, but after a couple of years if your performance is not up to the mark, the latter would be preferred for a promotion.

So if a major thrust is given to boost your performance, MBA is surely helpful!!