If organised retail has sharply accelerated in the last 3 years, what does this do to employment? ?If you want us politicians to advocate FDI in retail, you have to explain how the growing population will be absorbed,? Biju Janata Dal MP BJ Panda asked Rajeev Kohli of Columbia University, who presented a paper titled ‘Organised Retailing in India: Issues and Outlook’, co-authored with Jagdish Bhagwati at the NCAER-Columbia conference.
Panda pointed out, in the context of the paper titled ‘Services Growth in India: A Look inside the Black Box’, co-authored by Rajeev Dehejia and Arvind Panagaria, that the bulk of value addition in the services sector was taking place in larger firms, which were less employment intensive, than the smaller firms. In this context, he said, the employment question is a vital one.
While replying, Kohli pointed out that despite the growth of organised-sector retail in the last few years, many times more employment was created in unorganised sector or mom-and-pop retail shops. So it was unlikely the growth of organised retail would squeeze out mom-and-pop retail shops in the near future. Kohli said increased GDP growth would result in a surge in demand for durables ? like ACs and cars ? and this would mean retailers would need to invest a lot of money, money that only organised retailers have. So there was really no option but to allow organised retail to flourish.
Thomas Reardon, the discussant for Kohli’s paper, emphasised the importance of not limiting the debate to a 0-1 (either kiranas will survive or supermarkets will take over completely) because the shift from unorganised to organised retail is inevitable ? 7% of atta, edible oil, rice and vegetables are already being sold through supermarkets, which is already half of what the PDS system sells today, after just three years of growth. India is buying time with growth instead of preparing the small retailers to deal with the change, unlike governments in parts of East Asia, especially China. All of which left Panda feeling uneasy at the end of a session that was supposed to provide him answers on how to cope with the lower employment that would result from the advent of organised retail.
In the context of employment expansion, Panagaria pointed out that the government would have to bite the bullet on labour reforms in order to generate employment for low skilled workers, in response to Panda’s statement that labour laws are likely to remain unchanged for at least a decade or more.
Anusha Chari of UNC Chapel Hill presented a paper, ‘Does Liberalisation Promote Competition’, co-authored with Laura Alfaro from Harvard University. The paper found that liberalisation does indeed increase competition, as measured by reduction in firm sizes, entry of new small firms and increased dispersion of sales and profit.