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Q&A: Rajan Mittal, President, Ficci

'The amount of respect India commands today is fantastic'

Pallavi Aiyar 

Rajan Bharti Mittal

Rajan Bharti Mittal, vice-chairman and managing director of Bharti Enterprises and president of the Federation of Indian Chambers of Commerce and Industry (Ficci), makes a passionate appeal for opening the retail sector in India, in an interview with Pallavi Aiyar at a recent ‘India Global Business Meet’ organised by and in Madrid. Edited excerpts:

You represent Indian industry as president of What changes have you noticed in how Indian industry is perceived in Europe?
Five years earlier, India was not on the radar, either politically and economically. Now, more so after the economic crisis, the position has changed completely. The amount of respect India commands today is fantastic. The world has changed from G7 to G8 to G20, where India plays a key role. May be it’s too early but we can already think of the G8 becoming the E8 or the East-8, because the East has seven or eight economies getting to a trillion dollars-plus and are really the new markets. There is a real recalibration of the global economy taking place.

India and the EU are currently negotiating an (free trade agreement) in which the Europeans are pushing for a further opening of retail. What is your position? Will it be beneficial to India?
Retail in single-brand has already opened up in India, to 51 per cent (foreign equity investment limit). In multibrand, there is none. But in cash and carry (wholesale), there is 100 per cent. We have to understand that retail is about an entire value chain. This cut and dice approach does not help India to get the technology or the benefits. India is the second largest producer today of fruits and vegetables. But 40 per cent of this goes to waste from farm to fork because of lack of cold chains and warehousing. So, will retail opening be beneficial? Will it get people to come and invest in India and bring technology? Clearly, Yes.

Food security is an issue for India. If we can get to get technology and invest in the back end and the full value chain, can you imagine if out of 40 per cent, we can start saving 20-25 per cent of what is wasted?

So, retail should be opened up. The single-brand (foreign equity ceiling) should be taken to 100 per cent. There is no reason why single-brand like Ikea, which have come and gone because they need 100 per cent, should not be there. On multibrand, I understand there needs to be a consensus built, so may be a step by step approach is best. To open up 49 per cent as a start, so that (foreign direct investment) can start coming in. Then, watch how it goes, and open up further. There are no national security issues involved here.

What about the impact on mom and pop stores?

In the Indian system, they will always exist. If you look at the UK, do you think mom and pop stores have gone just because Tesco and Carrefour and others are there? No. It’s mostly Asians who, in fact, run the UK mom and pop stores. So, will the opening of retail have an impact on India? Some impact, yes. But look at the larger picture. A mom and pop store today has, on average, 1.5 person employment, including the owner. In organised retail, even the smaller stores with 2,500-3,000 sq ft are having 14-16 people, while larger stores have 100-plus people. Cash and carry stores have 200 people. So, it’s illogical when people say employment will get hurt. Only organised retail is generating employment and for those who are 10th pass. We train them for three weeks and they are on the shop floor. About 25 per cent of my workforce is women and retired people, who work flexi-hours of 4-6 hours. At 58, people retire but they are still fit. It’s great for them.

There are 12 million mom and pop stores in India. We can take a calibrated approach. Their average size is 700 sq ft. We can say an organised retail store must be a minimum of 2,000 sq ft. You can avoid it in smaller towns where, may be, people will be more effected, say, with a population cap of 200,000 people. Experiment, test, but time is passing by.

Everyone who was an opponent of telecom used to say the same thing. Look where we are. Look at aviation. Any sector that has been opened up has helped the needle move in the right direction. Just the rhetoric that retail (opening to foreign equity) is bad for India is wrong. Look at the positive knock-on effects for the agri business; agri processing, manufacturers and even the common man. We all talk about the aam admi. With opening up, it is he who will get better products, better quality, better price. What about him? Why does no one talk about the common man and the benefits he will get?

What is the outlook for organised retail in India?
Today, we are five per cent of total retail. On average, growth will be 20-24 per cent per year. Today, the market is almost $380 billion and this will grow to $700 billion in the next 10 years. Of this total, modern retailing will be no more than 20 per cent.

Look at China or Brazil. China’s modern retailing has been open for more than 10 years and it only accounts for 16-18 per cent of the total. In Brazil, it’s 20 per cent.

India, even after 10 years, will be at 20 per cent modern retailing, with the rest being mom and pop and traditional stores.

Is Bharti looking at tie-ups in Europe for its retail or agri businesses?
In retail, we are already settled with our partners. In agri, we only work with De Monte. My purpose in being here is to invite more European to come and invest in India, because agri processing is something India needs. Why can’t India become a processing hub? I want to encourage this.

First Published: Tue, June 29 2010. 00:38 IST