A Case for FDI in Retail

Just before the 2004 elections, the BJP manifesto had clearly stated that, if elected, they would support FDI in multi brand retail. On the other hand, the Congress was against it. Over the past decade, the stand of these parties has reversed. Over this period so many retailers have been forced to shut shop because of their inability to raise money.

I founded Guardian pharmacy in August 2003 after spending 25 years in the corporate sector with a vision that I would build “Boots” in India. In a market fraught with fake medicines and poor retailing practices I had set out to make a paradigm change in the manner in which medicines were sold in India. Most chemist shops in India are small, dusty, counter stores and the customer has to stand outside the shop at the counter in summer and winter. The stores selling medicines to cure the patients were completely unhygienic in their practices.

Standing outside several chemist shops and observing a customers buying behaviour gave me far more insight than I could have could through extensive research. By way of example I observed the following steps when a customer walked up to a chemist shop to buy medicines:

  1. The customer would walk up to the counter of a chemist shop and ask for a bottle of cough syrup.
  2. The chemist would rummage through dusty store shelves and pull out a dusty bottle.
  3. The chemist would then reach for a dirty rag from underneath the counter and he would clean the bottle of cough syrup with this rag.
  4. Once the bottle had been cleaned, he would take a paper bag made out of old newspapers or a plastic bag from a shelf below the counter.
  5. He would then either “blow” into the paper bag to open it or wet his thumb and index finger with his spit and then open the top of the plastic bag.
  6. The bottle of cough syrup would then be put into its packaging and handed over to the customer.
  7. If the customer asked for an invoice, it would be issued manually. If no invoice was asked for, it would not be given.
  8. There would be no checking of the expiry date, the batch number and the maximum retail price printed on the bottle.

Every stage of this purchase process was unhygienic and lacked transparency. Cleaning a bottle with a dirty rag or blowing into a paper bag or putting spit on a plastic bag was unacceptable when selling medicines and yet the Indian customer did not seem to care. Not taking a bill for a purchase ensured that if there was a problem with the medicine, there was no way to establish that the medicine had been purchased from that particular chemist.

This is what I wanted to change to bring in best practices into a completely disorganised retailing business. The Drugs and Cosmetics Act is an old and archaic law that needs change and the country needs many more drug inspectors.

  1. We started making changes by improving the look and feel, the ambience of the store. By air conditioning a store, we ensured that there was temperature control for medicines, an essential requirement in our country.
  2. We hired and trained pharmacists across the country. We changed the employment conditions for these pharmacists who were earning below minimum wage in several of the local chemist shops. Today we have a large team of well-trained pharmacists who not only earn much higher salaries but are also earning incentives based on their performance.
  3. We worked hard with the Government to try and get them to allow pharmacists from one state to work in another state. We failed. Surprisingly, this is still not permitted. So a pharmacist from Gurgaon cannot work in Delhi!
  4. We have ensured that no cash sales were mad at any store and no medicines were sold without prescriptions. We insisted that all customers take bills for their protection to hold us accountable.
  5. We invested heavily in front end and back end systems, store renovation, modern and well equipped warehouses and stock audits.
  6. We guaranteed our customers 100% reliable medicines and worked with distributors to ensure the right quality medicines were sold at our stores.
  7. We started bar coding medicines in an industry which continues to defy the need for bar codes because it makes stock identification easier.
  8. We brought in a system into offering discounts for our senior citizens and took away the arbitrary system of offering a discount based on the “pleasure” of the shop keeper.

And we are continuing to do so many more things in our retail segment selling health, wellness and beauty products.

Yet when it comes to expanding our operations, we are told the foreign direct investment in retail is banned. What is the difference between an Indian retailer with unlimited funds from other businesses and a foreign retailer? The case against FDI stands on the flimsy logic that foreign chains will take away the business of domestic “mom and pop” retailers. Are the Indian conglomerates that have huge retail operations any different or have they given guarantees to protect small retailers?

How then can Indian chains built by professional managers turned entrepreneurs like ours survive, thrive and grow?

This Government recognises the value creation FDI can do in our country. So many hitherto protected sectors have been opened up for FDI. What makes retail deserve such protection from the Government?

It is important for the Government to take a dispassionate look at FDI in multi brand retail and look at what is good for the Indian consumer.

Ashutosh Garg

The author is the founder Chairman of Guardian Pharmacies and the author of the best-selling books, Reboot. Reinvent. Rewire: Managing Retirement in the 21st Century; The Corner Office and The Buck Stops Here – Learnings of a #Startup Entrepreneur. 

Twitter: @gargashutosh

Sorry Amitav Ghosh, you’ve got it all wrong

A rebuttal to the article written by Amitav Ghosh

TOI – 30th November 2014

It has been 6 months since the Modi Sarkar assumed office on the promise of “achhe din” and it has been 6 months since the so called “intelligentsia” of our country has been looking for a reason to find fault hoping that the new Government would stumble and they would promptly start the “I told you so game”. The Congress party and some of the other political parties are making up baseless allegations every day. The angry young man of the Congress moves from one rally to another shouting at the top of his voice hoping that the few people in the crowds who come for his rallies understand his logic of “escape velocity”. So many people are actually waiting eagerly for one false step and virtually everyone from journalists to politicians to the educated elite has become an expert on every aspect of governing this vast country.

Unfortunately for such disbelievers, this Government is working with a clear direction and a strong leadership supported by a clear majority in Parliament.

I do not wish expound on all the good work the Government has already been done – that is for everyone to see and judge, both in the short term and the long term. The victory of the BJP in the recently concluded Lok Sabha polls has left most political pundits gasping – partially because India now has a stable coalition free government and partially because these very pundits see their own roles being reduced to redundancy – there is nothing factual that they can pontificate on and therefore much of their pontification is based on what they would like to believe and what they would like us to believe.

Almost everything that the Government or the Prime Minister has done or is doing is blamed on the sinister hand of the RSS. I have heard the comment “RSS type” from so many friends that I had to ask someone the other day what is the meaning of “RSS type”. Most people who have known me for a while know that I have been a member of the RSS for several decades. However, more recently, when I told some new friends that I am a member of the RSS the first reaction they had was “Oh then where is your khaki shorts, black cap and your lathi”? Someone even asked me if I had now become a fascist!

I am amazed at how little and how shallow the understanding is so many of the English educated Indians about the largest, most well organised, disciplined and dedicated organisation in a nation that is 80% Hindu. How can we be so myopic in our understanding and how can we, who claim to be the English educated elite with a global perspective, be so parochial when it comes to the RSS? Whenever I have offered to chat with the so called “disbelievers” most of them have backed off and are not willing to even get into an intelligent and informed dialogue. The opinions that they have formed over the years based on what little they have heard and read, without any personal experience is a cover that they prefer to retain because in ignorance lies their security.

As I read the incredibly ridiculous comparison that Amitav Ghosh, an author who I respect for his writings, made between Prime Minister Narendra Modi and Turkish President Tayyip Erdogan in the Sunday Times on 30th Nov 2014, I was appalled at the comparison he has made and shocked at the almost unwritten prayer from the author that there will be demonstrations and unrest in India in the near future.

I am therefore constrained to write this piece to rebut his arguments and sincerely hope that one of the mainline newspapers will publish this as another view point. Mr Ghosh is obviously a Modi / BJP / RSS baiter – that he chose to select a leader who has faced a revolution in June 2013 did not come as a surprise to me. I almost expected him to compare Taksim square to Godhra – fortunately he did not.

I was in Istanbul for three days during the revolution, staying at the Hyatt overlooking the famous Taksim square. I walked through the park several times in the day and night and spoke with many of the “revolutionaries”. In the carnival like atmosphere prevalent in the park, most of the young people were not sure why they were there and a lot of the young people on whom this so called revolution depended were there for the fun of it.

In his essay, which is very well researched and written when it comes to facts about Turkey and India, he compares the development of India and Turkey and the issues both countries have faced through the decades and the similarity therein. I respect his analytics and conclusions between the similarities in the two countries over the past few decades. He forgets during his comparison that the BJP has been in power for a very limited period in the 67 years of independence and for the first time in 2014 with an absolute majority.

The historical comparison of the two economies and the multi-cultural and secular credentials of both economies is where the similarity ends.

To compare the two leaders because of their background, one selling lemonade and pastry and the other selling tea is silly. So many world leaders, including the new President of Indonesia, to name another major country, have had very humble beginnings. The two leaders are poles apart in everything unless of course one is determined to fit a square peg in a round hole – Mr Modi has just assumed the mantle of power while Mr Erdogan has been there for over a decade.

Now to address some of the specific points raised by Mr Ghosh as he looks at his crystal ball and announces the future of our country in his article:

  1. The “downdraft” which according to him Mr Modi faces is actually a “tsunami” of positive energy and hope that the people of this country have in the BJP and Mr Modi’s leadership. This is why the BJP is being voted back into power with record numbers not just in the Lok Sabha elections but also in the state elections.
  2. The “old strategies of growth” which he refers to have already been used by up the Congress government in the past decade. The malls have been built and the real estate bubble has been fully exploited by a chosen few led by the Congress son-in-law. What India looks forward to under the new Government is balanced all inclusive growth with a strong focus on manufacturing, tourism and infrastructure development.
  3. Sale of rivers, privatisation of natural resources and silencing environmentalists is surely a figment of his imagination. When has a strong cadre based party with its beliefs firmly rooted in democracy ever been able to sell off natural assets of the country? On the contrary, it is the Congress which sold off the country’s natural resources of coal and airwaves and it is the BJP which is bringing back some degree of sanity to the coal and telecom licences.
  4. “Revelations of corruption” in the Modi government will happen but these revelations will be matters of corruption of the previous government at the centre and the state. However this is not what I think Mr Ghosh is talking about. Peering into his crystal ball, he is referring to corruption that is expected to be revealed in the Modi government. He is obviously not aware or maybe not convinced about the hard line the Prime Minister has taken against corruption and that most of the “fixers” who had been nurtured and prospered under the Congress regime now don’t come within a mile of North block.
  5. Is his comment about suppression of grass roots opposition and people “pushing back” a hope to see the country that he claims to love in turmoil? This has never happened in our country and this will not happen in the past. On the contrary, suppression of the opposition has happened under the Congress.
  6. “When protests break out in India, as they surely will” says Mr Ghosh as he gazes deeply into his crystal ball and sees Government excesses, a subdued population, a broken economy and a leader who is abhorred by the masses, I can only respond by saying that his crystal ball is jaded and foggy and needs to be sent for some one time repairs, as quickly as possible.
  7. The organisations that brought Modi to power share a similar set of values when it comes to the nation. The leader of the RSS has recently spoken about “our Abhimanyu” who has the ability to break the chakravyuh and take the nation to a new high. Something that has never happened before.
  8. While the world, according to Mr Ghosh, is entering a period of volatility, I along with millions of Indians who stand by the government believe that India stands as a beacon of hope for the masses as it enters a phase of stability and rapid growth. The period of extreme volatility, crises and firefighting is coming to an end after the uncertainty of UPA II.
  9. Most people who had questioned Mr Modi’s competence in foreign affairs have either been pleasantly surprised or simply shocked at the ease with which he has slipped into the role of a consummate diplomat and a world leader with enviable acceptance across the world in such a short period of time.

Finally, what Mr Ghosh chooses to forget is that India is a very vibrant democracy which has always worked barring an aberration in 1974 during the emergency, and oh yes, in case he omits the fact, this emergency had nothing to do with the BJP or any of the predecessors of Narendra Modi. Even an all-powerful Indira Gandhi (who may have been a better subject for comparison with Erdogan) was voted out of power after the emergency and then voted back a few years later when the voters realised that she was the better of the options available to lead our country.

But then, to borrow from Shakespeare, Amitav Ghosh is an honourable (and famous) man and such could be the power of his words that he will be quoted and re-quoted by many people till some will actually start to believe that this fiction of his imagination is actually fact!

We have elected the BJP to power and the BJP has elected Mr Modi as their leader. Now let us give him and council of ministers the time to deliver. This is too early for some pundits to start writing the epitaph of the BJP and its leader.

Ashutosh Garg

2nd December 2014

The author is the Chairman of Guardian Pharmacies and the author of the bestselling books, Reboot. Reinvent. Rewire: Managing Retirement in the 21st Century; The Corner Office and The Buck Stops Here – Learnings of a #Startup Entrepreneur. 

Twitter: @gargashutosh