Get small units into organised retail

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: All major reports point out the benefits that allowing FDI in retail sector would bring to India. The McKinsey reports in 2001 & 2003 concluded it would improve productivity (2.5%), increase annual output by 12% and also create eight million jobs. Why shouldn’t it be allowed in the national and consumer interest? The objection to it from the SSI segment and NGOs is also not understandable.

—PR Consulting, Mumbai, through e-mail

At the heart of the debate are three issues. These are fear of displacement of existing employment, adverse impact of chain stores on the community, a topic of hot debate even in the western world, characterised by the fight between ‘heart and wallet’ and, finally, the returns for India in lieu of opening one of the world’s largest retail market to MNCs.

The very size of the retail sector (estimated to be Rs 5 trillion and close to 10% of GDP) and the huge number of people it employs (6.7% of total employment) makes it a worthy candidate for debate. The National Economic Census (1998) notes that retailing is one of three economic activities that dominate our hinterland. It says close to 8.3 million own-account enterprises (one-person organisations) have been engaged in retail trade (non-agricultural). The number of establishments (employing 1-10 persons) in the same activity was 2.3 m. Therefore, in all, around 10.6 m units in retail trade, employing close to 18.5 m people.

Only 2% of the retail sector is in the organised segment, primarily concentrated in metros and larger cities. It is the millions of unorganised, tiny retail outlets that form the backbone of the sector. Of the latter, the largest segment is the one-man units: 8.3 m spread over the remotest of areas and inaccessible villages, with 94% of these having no access to even electricity!

It is extremely unlikely that large general-merchandise discount stores would have much impact, at least in the foreseeable future, on units in rural areas. The impact of large stores in the short and medium term would be greater in metros and larger cities, because a much greater need for these is felt by consumers. The infrastructure of cities is bursting at the seams and traditional markets have become chaotic. Further, traditional Indian retail outlets suffer from limitations of price, quality and variety of merchandise. Today, Indian food markets (constituting 40% of retail) are also considered one the most adulterated in the world.