It is a matter of deep disappointment that all discussions relating to retailing ecosystem in India end up converging on a single theme—whether India should allow FDI in the sector or not? Worse, in these last 15 years of cacophonic arguing, both the protagonists and antagonists have resorted to taking subterfuge behind myths, lies, half-truths, or plain ignorance about the actual impact of allowing big business (irrespective of the country of origin of its ownership) to enter the business of retailing. Meanwhile, the business of retailing has been undergoing fundamental changes that have started to make a presence in India too. Indian consumers’ needs and shopping behaviour have also been undergoing a significant change. It is high time that the various stakeholders in the discussions relating to retailing in India start making a serious effort to understand how efficient or inefficient India’s retailing infrastructure is today. And then how to make it more efficient for the consumers, the producers of consumer goods, those whose livelihood rests upon the retailing value-chain and, finally, the state and central governments who have to expand their tax revenue base to meet their revenue needs to provide better physical and social infrastructure to India’s masses.
The most crucial fact about the retail sector is that it provides the largest employment in India and offers the best hope for employment for tens of millions of Indians in the years to come. Further, this is the only sector where relatively less-skilled or even unskilled workers can make a living. Hence, any threat to this employment-creation potential of this sector—especially when India suffers a major deficit in creating jobs or self-employment opportunities—has to be carefully studied keeping personal ideologies aside.
It is true that India’s existing retailing ecosystem is highly inefficient. There is an unacceptable value-loss in both, the manufacturer and consumer prices, thereby depriving the manufacturer of a fair value for his effort while forcing millions of inflation-ravaged, low-income Indians to pay much more at the retail than what they should be paying. This ecosystem is also inefficient for the state governments in particular when it comes to getting their fair share of local taxes, and inefficient for the central government when it comes to getting its share of indirect taxes since many small and medium scale manufacturers can successfully evade the taxation net by using the current distribution channels comprising an abundance of middlemen. The highly fragmented and