Rarely can India?s politicians and bureaucrats be ever accused of having a liberal, futuristic, truly nation building perspective. Yes, there were some whiffs of fresh air once when Rajiv Gandhi assumed power and kindled hopes of leading India to a modern future. In the early 1990s, even if under various internal and external compulsions, there was a period of excitement with a series of major reforms. Unfortunately, the last decade has been characterised by more disappointments and unrealised hopes even though a few indicators such as GDP growth rate, stock market and property and other asset classes’ highs, and the increasing number of billionaires in various annual lists may give the impression that all is well in India.

This last decade has seen India losing precious time as it engages itself in meaningless or interminable debates, and a stubborn refusal to take a principled, equitable stand on even the most logical and most urgent issues. Liberation of the retail sector is just one of the many?but perhaps among the most vital for hundreds of millions of India?s poor and low-income citizens?sectors that has been caught in an illogical debate. Even after a decade of posturing and conflicting views and statements from successive governments and self-appointed representative of the various stakeholders, there is little clarity about the government?s view on having a modern, efficient, vibrant retail distribution system in the country. This is something that countries such as the US, the UK, Germany, and France put in place more than a 100 years ago. China did the same 30 or more years ago!

While just about everyone in the government (and a few habitual, quixotic activists who are always on the lookout for a cause to raise their voices) talks about the impact modern retail?only when it is owned by international shareholders?has on the about 14 million traditional Indian retailers, there is no voice in this debate for two of the most important stakeholders. The first and most important group of stakeholders are the nearly 800 million Indians who exist below or on the fringes of the poverty line, and the next 300 million who have made it to the middle-income class but are finding the very high inflation?especially in food?putting serious pressure on their aspiration to indulge in newer categories of consumption beyond the basic needs.

Recent data clearly highlights the price being paid by India?s poor and less well off as the government continues to drag its feet and keeps coming out with discussion papers and inter-ministerial panels. As per data from the National Horticulture Board for July-October 2010 period, the price-differential for 5 key vegetables (potatoes, onions, tomatoes, cauliflower and brinjal) in 10 select cities (Agra, Ahmedabad, Bangalore, Bhopal, Chennai, Delhi, Guwahati, Kolkata, Mumbai and Ranchi), between local mandi or wholesale markets and retail cost to the consumer ranged between 18% to 200% (see graphic), with an average cost escalation of more than 50% for the consumer.

Further, the wholesale prices themselves vary drastically across India, with considerable difference even within cities in same zones such as Agra and Delhi. The wholesale price of tomato in Agra (just about 200 km away) was about 250% more than that in the wholesale market in Delhi. Exactly the opposite is true for potatoes, where the Delhi wholesale price is higher than that in Agra by almost 250%. In some zones, the price differential in wholesale prices is as high as 400%, leading to a correspondingly higher retail price for the consumers too.

The inefficiency in the distribution system and the price being paid by the consumers should be enough reason for any government and any politician to reform the system with a sense of urgency. Yet, only the interests of the middlemen and the price-gouging by many of these millions of small retailers seem to matter the most to those who have been endlessly debating the merit of liberalising the retail sector and attracting investment?from within India and overseas?with a pragmatic and bold and not the so-called ?calibrated? approach. India needs approaches that are all ?calibrated? towards delivering quantum change, simply because it has already lost decades on account of fuzzy ideology, political expediency and meaningless debates.

The second most important stakeholder, and in the name of whom just about every politician seeks votes and doles and subsidies, is the Indian farmer. An efficient, streamlined distribution system with a minimum number of intermediaries or middlemen is likely to benefit the farmer, reduce wastages in the supply chain and, in India?s context, actually empower the otherwise totally marginalised farmer. However, a bigger benefit to the 700-plus million rural India inhabitants is the possibility that modern retail offers to create non-farming jobs?be it in sorting, grading and processing of food or in food distribution centres or even directly in the retail front end. Retail is one of the few sectors that can employ men and women of all strata, across the entire country, with relatively less education and relatively lesser quantum of vocational training.

India?s GDP growth is such that for decades to come, small and independent retail will actually grow in numbers from the currently estimated 14-plus million to more than 20 million by 2020. This is simply because not only is modern retail highly capital-intensive but it is also constrained by several factors, including a lack of planned retail estate in desired quantum and an inability of different formats to cater to all the needs of all the people. For instance, modern retail can barely address customers in about 50,000 of India?s 660,000-plus villages and that too indirectly through cash & carry formats and by supplying to small, independent retailers in these villages. It cannot reach out to customers living in dense urban centres simply because retail space is not available there and customers need the convenience of a neighborhood store.

There are, of course, many other benefits of a modern retail system including better compliance with taxation obligations and corresponding improvements in revenue collections for the state and central governments, reduction of the growing menace of spurious food and drugs and other consumer products reaching consumers through unorganised and unregulated retail channels, and creation of several 1,000s of new enterprises to serve the needs of modern, organised retail businesses.

The government must put an immediate end to this debate on the modernisation of India?s retail sector and should open it to investment?both domestic and international?with no caveats and no complications. Yes, the retail sector will require clearer policies to protect consumer rights, zoning to protect the interests of small and large retail businesses and encourage competition at the same time etc. The government can and should focus on getting such a policy framework in place rather than wasting time and effort in restricting investment, especially foreign direct and indirect investment, into this very vital sector.

The author is chairman of Technopak Advisors Pvt Ltd arvind.singhal@technopak.com