Government report on retail — between the lines

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Even before the findings on retail trade by Indian Council for Research on International Economic Relations (ICRIER) have been made public, contradictory reports have begun appearing in the media.

The ICRIER was commissioned by the Prime Minister’s Office (PMO) at the behest of the chairperson of the ruling United Progressive Alliance (UPA), Sonia Gandhi, following protests from unorganised retailers, who were able to bring on political pressure.

A section of the media said the report found that advantages of smaller retailers would erode sharply as organised retail takes a final shape.

However, the director and chief executive of ICRIER, Rajiv Kumar, said overall impact of organised retail would be positive and small traders would be able to compete with larger formats in the long run.

“Organised retail will not kill kirana shops, but the small ones would over time adjust to working in tandem with the big retailers. This is how impact of big retail on kirana shops would wither away in the long run,” Kumar said.

Ironically, even the government appears to go along with this view – as reflected in a reply during the recent winter session of parliament.

To a question by a BJP member, Surendra Lath, from Orissa, the minister of state for agriculture, Taslimuddin, said, “There is no restriction on the entry of big corporate houses and other domestic investors into the retail sector. Besides, the organised retailing sector would create more employment opportunities and improve the quality of employment in the long run.”

Perhaps the most significant aspect of the reply was: “The share of organised retailing in the total retail trade is very small and it would not have any major adverse impact on retail outlets in the unorganised sector.”

According to India Retail Report 2007, organised retail in the country accounted for Rs 55,000 crore ($12.4 billion) at current prices in the calendar year 2006, increasing its share to 4.6 per cent of the total retail market, which stood at Rs 12,00,000 crore ($270 billion).

The fact that despite protests Indian companies are entering into joint ventures with foreign retailers – such as Bharti with American giant Wal-Mart – are surely indicators of the shape of things to come in this sector.

Another fact that should not be discounted is the enterprise of the small vendors, as was seen in some of the colonies in the capital, New Delhi, where the roadside vegetable seller had on display ‘field fresh’ vegetables, which he was selling at a higher price on the grounds that it was fresh. Besides, the Indian housewife still prefers to buy from these vendors as they find it easier to bargain with them, which is not possible at the large retail outlets where the prices are fixed – so either pay, or leave.

“As we can still bargain with these smaller vendors and it is easy since they are selling their goods just at the doorstep, we would not want them to shut shop,” said a housewife residing in an upper middle-class locality of the capital.

So, whatever the final outcome of the government-commissioned report, both organised and unorganised retailers will continue to co-exist, as was observed by Rajan Bharti Mittal, managing director of Bharti Enterprises and also chairman of the FICCI Retail Committee.

– Sri Krishna

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