India: An outraged nation of shopkeepers

Long protected from competition, small businesses fear an invasion of foreign supermarkets

It is early evening in south Delhi and in his small, family-run shop, Harjot Singh is delivering a performance worthy of an acrobat or a juggler without breaking a sweat. As he reaches to take the money from a woman bearing two paper bags of sugar, another customer slams two loaves of bread on to the counter.

A woman standing outside the shop calls out: "I need a nine volt battery – how much is that?" As he twists to give her an answer, his eyes are on yet another woman who has walked in with a plastic bag of milk, dropped 20 rupees on to the counter and left. Another man is impatient to pay for his fruit juice and lemonade and be on his way, and Mr Singh stabs at an oversized calculator, working out the bill. Just then the phone starts ringing; it is another customer with an order for delivery. Mr Singh cradles the phone under one ear and hurriedly begins scribbling down items.

This is what shopping is like for the vast majority of people across India, but for how much longer? After the government announced last week that it was relaxing the rules on foreign investment in India's £250bn retail market, the country has been convulsed by a debate about whether the likes of Walmart and Tesco should be allowed operate here.

Supporters of the move say big retailers will help develop better infrastructure and create decent jobs, but opponents say the estimated 50 million or more small shopkeepers, such as Mr Singh, who constitute more than 90 per cent of the trade, will be forced from business.

Yesterday, in scenes that underscored the level of concern felt by certain groups, parts of India ground to a halt as trade unions and opposition parties held a one-day general strike. While the big cities such as Delhi and Mumbai were largely unaffected, elsewhere schools were shut and trains and haulage services stopped.

Mr Singh, whose shop in a scruffy-looking market in the Malviya Nagar neighbourhood has been open since 1977, was not among yesterday's demonstrators, but he was with them in spirit. "I think it will affect us small businesses. We want to stop them coming," he said.

It is easy to understand the threat. Barely five miles away, in a spic-and-span shopping mall with plenty of parking spaces, Anjali Chaudhry was heading home from the Big Bazaar supermarket – run by the Indian-owned Future Group – with carrier-bags full of rice and pulses. Ms Chaudhry, 30, a consultant with a media company, lives just a few hundred yards from Mr Singh's store, but twice a month she likes to come to the supermarket for a "big shop".

"I will come here for a big buy because there's more variety and better prices. And everything is in one place – you don't have to jump around from shop to shop," she said. "But during the week, I will just go to the local shop."

Life as small shopkeeper is not easy. Kumal Kumar, who runs a store next to Mr Singh's, is open 11 and a half hours a day, seven days a week. He almost never takes a holiday. His one-room business somehow carries a range of merchandise that would shame a small supermarket in Europe, and he employs seven staff, who earn monthly salaries of about 6,000 rupees (£70) and whose main job is sorting stock and making deliveries by bicycle.

Mr Kumar's bespoke service – he will deliver a single packet of laundry powder at 8pm to a customer for no additional charge – is something the small shopkeepers are counting on to defend them against larger, foreign stores. But he believes they too will adapt to the Indian market and start similar deliveries. "We will die, but not suddenly," he said. "Then, after about ten years when we are finished, these large companies may have a monopoly."

Those who support foreign direct investment (FDI) in retail say the large chains will invest in vitally needed infrastructure such as cold storage and supply chain management. At the moment, it is estimated that anywhere up to a third of all farm produce rots before getting to market. The Indian Staffing Federation, an industry body, has suggested FDI could create 10 million jobs over the next decade.

Raj Jain, the president of Walmart India, said: "We are willing and able to invest in back-end infrastructure that will help reduce wastage of farm produce, improve the livelihood of farmers, lower prices of products and ease supply-side inflation."

The US-based Walmart owns the Asda chain in Britain.

Tesco, meanwhile, is lined up to operate a joint venture with India's Tata group. A statement from Tesco said: "Tesco welcomes this positive development but we await further detail."

Many farmers believe they will not get a better deal from the likes of Walmart and Tesco, because the large chains will buy from middle-men, rather than individual producers. "We would rather they bought directly from the farmers," said Ajay Jakhar, chairman of the Bharat Krishak Samaj, an organisation of 100,000 farmers across India. "It might not be easy, but if you are going to make a profit you also have a social obligation."

The row over FDI has left the government of Prime Minister Manmohan Singh fighting for its political life. A key coalition ally headed by West Bengal's chief minister, Mamata Banerjee, is due to formally pull out of the government today.

In an interview, the information minister, Ambika Soni, said the FDI reforms would provide additional revenue for development and investment in health and education. She denied claims from the opposition that the government had bowed to foreign pressure.

"In very simple terms, this will give a boost to the manufacturing sector and bring new opportunities for employment," she said. "It will ease the financial situation."

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