'Modern retail to affect 'kirana' business once market share rises'

Once the share of overall modern retail in food reaches about 25-30%, it is bound to affect kirana and small traders, Prime Minister's Economic Advisory council Chairman C Rangarajan said today.

Organised retail out-competes traditional retail on prices, variety and quality and offers greater convenience, he said.

Rangarajan, however, sought to allay apprehensions over the government move to allow FDI in multi-brand retail, saying that kirana stores will survive and can become part of modern retail by organising themselves and getting assimilated into the organised sector.

Rangarajan's comments come a day after the government notified its last week's decision to allow 51% FDI in multi-brand retail despite widespread political opposition.

"Once the share of overall modern retail in food reaches about 25 to 30%, it is bound to affect the kirana traders first and then the small and marginal traders," Rangarajan said in his inaugural address at a seminar on 'Organised Retailing Vis-à-vis the Farm Economy of India'.

He said, however, "They (small retailers) will continue to remain. In fact, the international experience shows that even in advanced countries where there are large scale department stores operating, the 'mom and pop' stores have not disappeared. They continue to exist."

Besides, Rangarajan said that kirana stores can be a part of the organised retail.

"These kirana stores and street hawkers can also become part of the modern retail change story if they can be assimilated into organised retail, organise themselves under their banner through franchisees, upgrade through infusion of capital, better training," he added.

Later, he told the media that large retail outlets probably will come in major cities and Tier-II cities.

Replying to a query on whether there are any possible initiatives for small retailers, Rangarajan said that when large retailers come into operation, then small retailers need to strengthen themselves.

"This is something that the small retailers will have to do on their own. To some extent for example organising farmers or some clusters can be helped by government, NGOs or other agencies," Rangarajan replied.

He said it will create an opportunity to improve infrastructural facilities in the agricultural marketing field which may ultimately lead to price reduction.

"The present marketing arrangements are not on sound lines. Therefore, induction of organised retail, more particularly foreign investments in to retail, can lead to an improvement of the marketing system and therefore will lead into some sense of softening of prices," he added.

Rangarajan said modern retail also ensures quality and safety standards for different products for the consumers.

"Thus organised retail out-competes traditional retail on prices, variety and quality. They offer greater convenience and better shopping environment to consumer," he said in his speech.

The traditional system and modern retail chains are complementary to each other and their co-existence is important for each other's functioning while providing options to producers and consumers, he opined.