Free Trade in India

R Murli Dhar

I will come back to this thread in two/three days, I mean the drift away from the OP questions, which I hope the OP is satisfied with.. Please do answer whether your queries have been answered.

I did a lot of train running and railfanning and leave tomorrow by road for two days to my native village Dharmapuri District ! Anyone there from this forum ? Please let me know by mobile to 944 324 9163. That's it. I have revealed my mobile number! You are welcome to contact me whether in Dharmapuri or elsewhere

As for the protectionist part, I would like to write in detail so please bear with me. This is becoming a very interesting thread and I would like to put facts and figures.. Nick-H mentioned the automotive industry- highly capital intensive, and long gestation periods. But to come to the middle/lower middle class, I can get a sachet of imported, repacked products in my native village, where there is hardly any water! You name, I can get it. Or it takes 10 mns drive to the Taluk HQ which is bigger and has large number of stores, general ordinary grocery stores, not fancy malls. As for quality of products, open economy means freedom of choice doesn't it. If somebody wants to buy cheap Chinese why should he not be allowed to? Okay, I guess you should keep out one made of likely carcinogenic or similar toxic substances. As for the black money, Note that only NOW America has been able to persuade the UBS has been pressurised into revealing names.. Indian officials have been asked to re-submit their Indo-Swiss Treaty to include the offence of 'evasion' not 'avoidance' of taxation! As for offshore investment coming via the Mauritius route, tell me what about Cayman Islands, some other names I forget (let me tell you not conveniently).. I will post. Give me some time. So too for procedures which has been mentioned by Dillichaat.

How say members we move this off to another thread, leaving the people with simple questions like the OP asked.. we are simply getting derailed here, in my unsolicited opinion. Good wishes, and keep posting till I come back. I love to see my mail box with postings from India Mike !

Moderator Note : This thread has been created by splitting off topic posts from the "Roupies" thread.
So continue your discussions about free/not so free/walmart/carrefour/apartment complexes and look alike shoes etc here.

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dillichaat

No, no, no. You can get some imported products in India, don't extrapolate that to 'all'. Having lived and worked in 3 continents I have a good idea of what's available and most of that stuff I don't see here, although I could get it in Europe or the US. What I do see is that all the imported goods are double the price they are in Europe or the US. I note that you say 'grocery stores' btw. Where's the supermarkets, pray tell? How comes there's virtually none of those? I get off the plane in Singapore, take the metro to Temasek plaza and am smack in front of the biggest Carrefour hypermarket I've ever seen. No Carrefour here in India and that's not because they don't want to come. What happened to the big 'Ikea' that was supposed to come? Protectionist single brand retailing rules, that's what happened.

I repeat: either it's taxed to death or under the umbrella of 'sanitary measures' / 'safety tests' such stringent conditions are imposed that it becomes all but impossible to get the goods in. Note, I wouldn't have any problem with those rules, if the same stringent checks were also applied to locally produced goods. But they're not, and for good reason.

Agree. Or we'll start up another one when you get back.

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Nick-H

Supermarkets? In the cities, there are lots.

I'd agree on the scale thing, though, the biggest I've been in here is pretty small compared to a standard Tesco or Sainsbury in UK. I can only think that if that scale of selling was going to work here, India would have done it itself already.

Ikea was coming here? ? It didn't?
Can you please give examples? I cannot think of a single thing where there is not a choice in brands. It is a long time now since a car meant an Ambassador.
That would be a good idea!

nayan

Another supermarket thread

Protectionist single brand retailing rules
I guess dillichat was talking about the law that exists to prevent foreign big supermarket retail chains from comming into India. Only single brand foreign retaliers are allowed - ex- tommy hilfinger is allowed but walmart is not allowed. But I have a very vague knowledge about this law/rule.

This law exists to protect small retailers in India.

I think small retail is pretty efficient in India. After about 10 yrs they have still not been killed off by the big bazaars and spencers.
(As has been done to death in the other supermarket threads) they have certain unique features which are even being emulated by the big chains.

DrHeckleAndMrSnide

Although I agree with some of dillichaat's comments and would love to see better products, even foreign made ones on offer, I have my reservations about the inexhaustible range of choices being good for us consumers here. I mean,
1) How would adding more brands of packaged processed fattening foods from all over the world be good?

2)Or more SUVs and cars that go faster than Indian roads can
keep up with, without changing the way driving licenses are issues to just about everyone?

3)Also, do you imagine the chaos if 1 billion Indians + 1 billion Chinese start consuming at the same rate as American consumers consume today?

4)On which continent do you dump the generated waste, which is bound to be generated when you buy stuff that you never intended to consume, just because it was on sale?

5)Who's going to supply unlimited credit to 1 billion consumers of India + 1 billion in China, the way Japan and China (I think) are financing US consumers today?

6)When India and China become "developed" countries, where do you find markets with sufficient populations to prop up sales when the "developed" countries are in a recession?

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Nick-H

I was just thinking that!

Soon, someone might mention Walmart, which is the India-retailing forum equivalent of mentioning Hitler in other fora.

Damn! I just mentioned both!

dillichaat

Yep, that's one of the things I was talking about. Under the current rules (revised last year with a multi-page circular that the Indian civil servants themselves can barely sort out, it's that complicated), 100% FDI is allowed in cash-and carry wholesale trading, 51% in single brand retail (Hilfiger, Lacoste etc) but 0% in multi-brand retail. It's a minefield and very complicated but this is the reason why Walmart etc won't come here.

On he comments of DrHeckle: I respectfully disagree. How can more choice and wider product availability be a bad thing? No one forces you to buy those things. More competition is ultimately always good for the consumer.

If the retail sector in India is well-organized, offers good value and is efficient....more power to them! But why o why is it then a problem to allow stores like walmart (not a fan, btw, it's just an example)? We had the same discussion in Europe, 40 years ago...retailers had to re-orient themselves but they're still there, only in niche markets and with higher quality products.

Anyway, my point is really not about supermarkets but about allowing free trade, as it is ultimately beneficial to all.

Gotta run, lunchbreak's over and a meeting room waits!

nayan

Free trade - does people still use that term in 2009? It used to be the holy grail in early 2000s. I guess there is a more nuanced view about it in most places around the world.

One of chief peeves against big supermarkets outside India - Usually the package sizes will be huge. you cannot buy smaller amounts. Or the smaller amounts will cost as much as larger amounts. It leads to a lot of inadvert wastage.

Ignite

I completely agree with you here, but..

When a store like Wal Mart is in the neighborhood, there's really no competition.

Wal Mart can/will sell(dump) their products in the market at a substantially lower price than the local retailers, which will definitely cause a lot of small retailers and "kirana" stores to go bankrupt.

Just in the past 20 years Wal Mart has changed the retail landscape of america, and is also substantially responsible for boosting the Chinese economy. As of the most recently available estimates 33% of all Americans shop at Wal Mart every week. That number i'm sure has shot up since the recession.

I know you used Wal Mart as just an example, and so am I. If not Wal Mart, then some other retailer.

A large retailer can afford to sell at a loss (or at a low profit margin, but in large quantities = economies of scale) for a couple years until they destroy their competition and then raise prices (the way Apple did to the music industry.)

P.S: Isn't this waayyyy off topic from [g]rupies outside of India.

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DrHeckleAndMrSnide

Well, I respectfully agree to disagree, then .

But could you please post your point of view on the questions I posed, when you have the spare time?

Also, when you say no one's forcing you to buy, I disagree here as well. There are many aspects, cultural even, that are so different from US or Western markets. Let me give you an example:
In India, as opposed to the West, the dowry system still exists, even amongst the urban, "educated", elite. I've know colleagues (with doctor parents and they themselves being degree holders) having to negotiate over whether a hatchback is sufficient as dowry or whether an entry level sedan is the minimum at the time of their sisters' weddings. Then they recoup their expenditure at the time of their own weddings. Imagine if aspirational pressures were coupled with availability of bigger, swankier SUVs?

Another example: Till the last generation, our parents used to buy flats/residences only until after their 40s. Now the average age in a place like Bangalore has come down to 27+ years. Most people only buy because everyone else in their office is also buying. This has led to a crazy growth in so called "super luxury" housing schemes with crazy prices. What luxuries? Water supply (many times from a borewell or tanker), electricity backup and covered parking. Nowadays, there's the trend to have swimming pools in every complex, regardless of the fact that the drinking water itself is supplied by tankers. Hardly anyone uses these pools ...
Any available stretch of land is converted (often dubiously) into buildings without taking care of adequate road width, parking, etc. There's the trend for "gated-communities" that many expats here prefer so much.... but what is feasible in a sparsely populated American suburb with plenty of land availability might not be so suitable in an overcrowded urban milieu that most Indian cities are. Then you're inviting urban crime, larger gaps in living standards between the people who live in these islands of luxury and the people who work as maids,security guards,attendants in these places and who themselves live in squalor just on the periphery. How would resentment not increase?

Thirdly, when you say wider choice, let's take the example of mutual funds.... once upon at time, there was only the Unit Trust of India with it's flagship US-64 scheme. Now there's a much broader choice.... but these days, what's the difference between two newly launched mutual funds.... their marketing machinery has to work overtime to justify their existence... equity funds, growth funds, select sector funds, fund-of-funds, fund-of-fund-of-fund-of-funds.. what?

More banally, could you please explain the difference (as is touted) between one model of (say) Reebok shoes and about twenty others of the same company in a similar price range, all having the same Hexride technology but each with their own speciality? I, for one, am not able to make up my mind while shopping on Amazon as to which of the twenty models I should buy... they're all promising a feeling of lighter-than-air. So I buy 2 or 3, since they're cheap and I can buy them on my free credit card.

Once I had a credit card representative offer me a free credit card at the Bangalore airport solely based on the fact that I had stepped off a (low-cost) flight and hence if I could afford to fly, I was rich enough to splurge of borrowed credit and pay it off. No documents needed, only boarding ticket stub was necessary.

nayan

Aspirational pressures exist all over the world. "Keeping up with the Jones" is not just an Indian mentality.

The one sector in which I can really appreciate what competition has achieved - the telecommunications sector.

DrHeckleAndMrSnide

Unfortunately, the Joneses have filed for bankruptcy and are now living in a trailer park, since their home was repossessed and their 401K money was blown up in the face of being invested in free-market equities and a small portion in the Bernie Made-off (with your money) hedge fund.

On an aside, I read somewhere that Pam Anderson is now living in a trailer park since she's $ 3 million in debt due to her insistence on covering her entire swimming pool with PLATINUM tiles

Nick-H

It is really strange, but those that claim to understand international retailing never seem to understand local shopping!No, they are not: British high streets are carbon copies of each other.

capt_mahajan

Damn. It's deja vu all over again.
(apologies to Yogi Berra)

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federica

Some topics have to be discussed again and again and again

Just two days ago while shopping I was complaining that I'd prefer shopping in my street in Trivandrum to the supermarket and discounter scene here in Germany:

On one side a tiny vegetable shop, on the other side a tiny shop for all the rest, from sugar to phone cards, and a medical shop just next door. Shopping could be done in 10 min, without a car.