Thursday, May 13, 2010

Biyani suggests consumption stimulation as development option

S Kalyana Ramanathan / London May 14, 2010

Retail giant Future Group's CEO Kishore Biyani said more focus should be given to get Indian consumers to spend more. It would be a faster route to overall prosperity than to first develop infrastructure.

His remark at a conference organised by India Business Forum at London Business School — "Spending is the way for India to prosper, not infrastructure", as he put it — sparked a heated debate which didn’t lead to any consensus. Biyani later admitted (after the meet) that his statement was more rhetorical, but then reiterated that India could spend its way to prosperity.

His statement was a reaction to a statement by another panelist who was critical about the regulatory issues in the retail sector in India. Satyen Patel, former Nike Southeast CEO, suggested that if India opened its retail sector to foreign players like Walmart and Tesco, it would lead to more investments flowing into logistical infrastructure in the country and thus could be a possible driver for growth and overall prosperity.

Asked for a reaction to Biyani's statement, retail sector expert and chairman of Technopak Advisors, Arvind Singhal (who was not present), said: “I am not sure what Mr Biyani said or in what context. I can only comment that if there is any single deficiency that can put a major speed-breaker to India’s growth, it will be infrastructure. Further, in infrastructure, we must consider both physical infrastructure as well as social. Physical is what we normally talk about (quality roads, steady and price-competitive power supply availability, especially for manufacturing industry, efficient public transport). The social infrastructure includes affordable, accessible (and accountable) healthcare, education, clean drinking water, and basic sanitation. Sadly, we talk even lesser about the enormous deficiency in this social infrastructure."

Adding: "The way I would state is that if India reallocates larger quantum of its public money to bridge the current and actually increasing gap in such infrastructure, it will be a more prosperous nation in the future. Conversely, India cannot dream to be a prosperous country if it does not spend much more on infrastructure."

Patel also contested Biyani’s statistics on his group’s growth. He questioned if Future Group would be as successful if foreign competition were given a level playing field in India. The government regulations in India do not allow multi-brand retail chains from foreign companies to operate in the country.

India has to find a way to grow with other people's money, like the Chinese, Patel said. "This is not about India versus the West," he asserted.

Biyani reiterated his point from another angle, by saying fruits and vegetables in India were grown closer to places where they were consumed to keep them fresh. He said only 70 per cent of the cold storage facilities in India are actually used, suggesting the need for improving infrastructure in the country on a war-footing might be an exaggerated, Western-influenced notion.

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