FE Editorial: Shoppers, stop

The Financial Express
Posted: Wednesday, Nov 04, 2009 at 2231 hrs IST
Updated: Wednesday, Nov 04, 2009 at 2231 hrs IST

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: Yes, no, maybe no, yes and no, yes, maybe yes—that’s been the policyspeak on FDI in retail since liberalisation. It’s confused and confusing, but then that’s what happens when vote bank politics overrules good economics. Manmohan Singh had it right when, during his reign as finance minister, Indian law was changed to permit FDI in retail trade in 1993. But a few years later, under pressure from Left coalition partners, the United Front banned FDI in the sector. Then NDA came along and considered lifting the ban. The consideration never reached fruition; millions of trader votes held sway instead. UPA-I raised expectations, with its commerce minister, Kamal Nath, considered a supporter of 100% FDI in retail. What UPA-I did deliver was 51% FDI in single-brand retail. Now, here we are in the reign of UPA-II and, as FE reported yesterday, what’s on the anvil is hiking FDI in single-brand retail to 74%. We ask, what about 100%, what about multi-brand retail segments? We wonder, why won’t our political leaders step away from the status quo, why won’t they deliver what study after study has found is in the best interest of Indian consumers?

Consider both the domestic and global ramifications of such studies. On the latter front, consumer spending in India—along with China—represents the Promised Land that may replace America as the driver of global growth. Last year, in the face of a scary recession, retail sales held up surprisingly well across Chindia. Hence, whether it’s Wal-Mart or Tesco, Louis Vuitton or Vogue, you see brand interest bearing up all the regulatory challenges in India—from difficulties in acquiring land to high import duties, government rejections and other restrictions. On the domestic front, an Icrier study released last year puts it all in a nutshell: households that earn less than Rs 10,000 a month save the most when organised retailers open shop in their neighbourhood, conserving about 10% of their shopping bills as a result. Other study findings were that, assuming increased FDI would increase modernisation, if the supply chains were modernised, this would both double employment opportunities by creating jobs in small manufacturing, food processing, construction, cold storages, warehousing, sorting, packing and labelling, and increase profit realisation for farmers selling directly to organised retailers by about 60%. In addition, consider the power factor: if US retail companies enjoyed a larger presence in India, in how many ways could India leverage that...

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