No idea left behind

A newspaper report suggests that the left parties' suggestions on how to restrict large format retail stores are being worked upon by various government agencies and that it is only a matter of time before formal licensing regulations are put in place. While the report talks only of licensing stores that are larger than 10,000 square feet, at least to begin with, it is instructive to understand what exactly the CPI(M) wants by way of regulation of such stores. For a start, it says, the licensing authority should be a committee that includes representatives from street vendors and small retailer associations. This is something like asking the owners of individual power-looms to decide whether large textile mills should be allowed to exist, or getting Hindustan Motors to sit in judgement on whether Maruti should be allowed to make cars.

But that is only the least of the contradictions. Among the other suggestions by the CPI(M), made in its note on May 30, one says that licences for new shops should be given on the basis of a population criterion (not more than X large shops per Y population, with the ratio to vary from state to state, and city to city), and there should be size slabs for different types of formats ""one size for discount stores, another for supermarkets, a third for hypermarkets, and so on. In case a large retailer is allowed to set up shop within an existing commercial area (say, by buying out an existing bunch of smaller retailers), this should be allowed only if the large retailer agrees to "share a substantial proportion of its floor area with small retailers at a concessional rent"""imagine the glee of a bureaucrat who has to define, and then implement, what "substantial" and "concessional" are!

It gets even better. Large retailers hoping to sell fresh fruit and vegetables, at prices that are lower than those of unorganised retailers/vendors, will have to set up large procurement centres and enter into long-term contracts with farmers""the CPI(M) wants each large procurement centre that is set up by corporate retailers to reserve separate space for government agencies, and the contracts they sign with farmers should not allow them to refuse to buy the farmers' produce on grounds of poor quality. And, the government must take over private stocks [so far, the CPI(M) wants this only for foodgrains] if they exceed a certain level.

Apart from the absurdity of introducing such elaborate and patently unworkable controls, the opposition to large retail doesn't take into account several important points. For one, it ignores the large welfare gains to be made if households get a 20-25 per cent price-off on household items that account for 50-60 per cent of their monthly expenses, and the resulting impact on the consumption of other goods, and overall savings and investment. Besides which, the fundamental premise of a market economy is that competition will displace some players, who will then look for opportunities elsewhere. To seek to protect every existing player is to freeze out change, which is simply not possible if you don't want the ossified kind of economy that the Soviet Union's became. Restricting organised retailing activity will perpetuate low-yielding jobs in an efficient sector, resulting in lower prices for producers and higher prices for consumers. Why the CPI(M) would want that is a mystery, especially given what Marxists are taught about the role played by trade in an economy.