Settling the argument

Some things are obvious: Organised retail outlets in India have an unusually low share of the shelf space in the market, even for a country at this stage of development. Studies have also shown that the trade in India takes an unusually large slice of the final consumer price, thus either making the consumer pay more or the producer get less. More often than not, volume buying by chain stores also forces producers to shed margins, thereby benefiting the consumer. Finally, any policies designed to change this undesirable situation will create some ripples, but the over-all "welfare effect" will be hugely positive for both producers and consumers "" as has already been demonstrated. In any case, organised retailing will continue to have a relatively small slice of the total shelf space, so mom and pop stores will continue to dominate the scene, especially in the large cities where finding the real estate to accommodate large stores can be forbiddingly expensive. It could be added that neighbourhood stores will have little competition from organised retail chains in the villages, and perhaps even in the small towns "" where the markets are probably too fragmented to be attractive for the larger stories. As for employment, most people may not be aware that Wal-Mart is the single-largest employer in the United States, so it cannot be said that large stores mean a reduction in jobs.

It does not take great intelligence to see all this, for most of it is common sense. It is no surprise, therefore, that a study commissioned by the commerce ministry has found out all the expected things "" that organised retailing will increase farmer incomes, will not lead to job losses, and any adverse impact on the existing corner stores will be only temporary. To this can be added the point that consumer preference may also be in favour of a better balance between large retail chains and small, neighbourhood stores "" certainly, on the evidence of the popularity of the chain stores that have already opened, there is no shortage of customers willing to shop with them.

Some other arguments have also been made in favour of allowing retail chains. For one thing, the growth of retail chains will lead to the development of better supply chains, and therefore greater efficiencies. For another, they will enable greater volume production, which in turn will help the international chains source more of their goods from India. It should be remembered that an important reason for China's export success, especially in relation to the United States, is the buying done by large chain stores.

Despite all this, a bogus controversy has been stirred up against the entry of chain stores; the target of attack initially was the international chains, but the new domestic chains also came into focus later. It may be too much to hope that those who have launched agitations against organised retail will give up their campaign, but it can certainly be hoped that governments (at the Centre and in the states where some chain stores have been ordered to close) will stop paying heed to patently irrational voices. The expert study should settle the argument on whether allowing chain stores is good for the country. What is necessary therefore is for the government to muster the courage to do the logical thing and allow chain stores to get into business. Failure to do that will carry a cost in many ways: lower producer returns, higher consumer prices, lost export opportunities, and even lost jobs.