ICRIER to study impact of big retail on mom-’n’-pop stores

Following directions from the Prime Minister’s Office (PMO), the commerce & industry ministry has mandated Icrier to prepare a study on the domestic retail sector, specifically to see if the emergence of large, organised retailers would displace mom-’n’-pop stores. The development is significant since Congress president Sonia Gandhi has called for an assessment of the future of small vendors if multinational retail giants such as Wal-Mart are allowed to set shop here.

The study will look at the impact that domestic retail chains have already had as well as the likely effect of allowing foreign-owned retail chains in the country, the commerce & industry minister Kamal Nath said on Tuesday.

It is expected to be a multi-dimensional study with focus on impact on farmers, employment, dislocation, prices and the small-scale segment. “Icrier has been asked to take into account various aspects of the retail industry and its affect on several elements of the economy. It is essentially a study on big-versus-small rather than foreign-versus-domestic retail,” Mr Nath said.

Last week, the PMO had written to the department of industrial policy & promotion (DIPP), seeking a study on the points raised by Ms Gandhi over the livelihood concerns of small vendors hawking fruit and vegetables. The letter had essentially asked the DIPP to consider the impact of both multinational retail giants and domestic retailers on small-scale entrepreneurs and mom-’n’-pop stores in the country.

The study is supposed to take into account the impact of retail chains such as Pantaloons, Shopper’s Stop and Reliance, apart from multinationals such as Wal-Mart. A number of players including Tesco and Watson are keen to tap the Indian market.

The minister also declared record FDI inflows of $2.04 billion in December 2006, which is 480% higher than the inflow of $0.35 billion in the same month of the previous year. Large chunk of the investments came in textiles, business services, chemical products and ceramics. Huntsman Investments of the Netherlands made the largest investment in textile sector. The company had earlier received a nod from FIPB to invest Rs 122.50 crore for acquisition of its existing Indian company. The other big investment came from Cairn, which invested in business services.

We expect total FDI inflows of $12 billion this year against $5.5 billion in 2005-06, the minister added. Total foreign equity investments were recorded at $9.3 billion during April-December 2006-07 against $3.5 billion in 2005-06.

The index of industrial production showed a growth of 11.1% in December 2006 against the same month the year before. Manufacturing recorded a growth of 11.9% in December 2006. “We are expecting 11% industrial growth this fiscal and a 12% in growth in manufacturing,” Mr Kamal Nath said. The industries that have shown an upward performance in December 2006 include wood and wood products, basic metal and alloy industries, metal products and parts, cotton textiles and leather.