12-14-2005, 11:38 PM
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Open up retail
The Pioneer Edit Desk
Prime Minister Manmohan Singh's comment on the sidelines of the recent ASEAN summit in Kuala Lumpur, that he will work out the modalities for allowing foreign direct investment in the retail sector in the next six months, comes as good news for consumers.
There is absolutely no logic behind blocking FDI in retail, and as Mr Manmohan Singh had argued in his interview to McKinsey Quarterly, opening up this sector of the Indian economy would be a logical extension of the ongoing economic reforms programme.
What adds urgency to the proposal is the Prime Minister's ambitious target of setting GDP on a sustainable trajectory of 9 to 10 per cent growth per year. That target can be achieved if Mr Manmohan Singh cuts himself free from a dogmatic Left which continues to live in a world where egalitarianism equals poverty, denial and deprivation of the masses and prosperity is seen as a cardinal sin. The case for opening our doors to FDI in retail can be argued on the strength of various points.
The strongest of them is the fact that it is an infrastructure-led business that offers great potential for job creation as well as bringing in billions of dollars. Traditional retail in India has been growing at a sluggish rate - and this is probably the reason why the Left feels compelled to support it - of 6 per cent per year. In comparison, organised retail, such as it exists today in its most basic and primitive form, has been racing at a phenomenal growth rate of 30 to 40 per cent per year.
If organised retail is allowed to flourish, this sector's contribution to India's GDP, which at present averages at 10 to 11 per cent, will increase, too, and have a multiplier effect on the country's economic outlook.
The Left, of course, argues to the contrary, conveniently choosing to ignore the enormous benefits that China has been reaping from FDI in retail over the past decade. The gains should not be quantified in economic terms alone; as the Economist recently pointed out, malls, the most visible face of organised retail, also have a social impact, opening up otherwise cloistered societies to new ideas. Strangely, the BJP and the CPI(M) share a common point in blocking retail reform: Both claim it will harm small retailers and lead to loss of jobs.
That is balderdash and bad economics. The ubiquitous corner shop serves its own purpose and is unlikely to be shut down because Wal-Mart opens stores across urban India. At present, some 12 million small retailers employ 21 million people, that is, each retailer generates less than two jobs. On the other hand, a single large store generates a sizeable number of jobs and invests in employee skill acquisition and upgradation.
Consumers will be the biggest beneficiaries of organised retail because they will not only get to buy products at competitive rates much lower than those offered by traditional retailers, they can also demand and get quality goods and services, both of which are at a discount now.
India has reaped huge benefits by opening up its telecom, insurance and banking sectors. The Left had blocked FDI in all three, painting a doomsday scenario and predicting loss of jobs. We have to just look around and see how wrong the Comrades were. These three sectors alone have generated 5 million jobs. The CPI(M) may be afraid of Wal-Mart, India is not. So let's open our doors.
<!--QuoteEnd--><!--QuoteEEnd-->
The Pioneer Edit Desk
Prime Minister Manmohan Singh's comment on the sidelines of the recent ASEAN summit in Kuala Lumpur, that he will work out the modalities for allowing foreign direct investment in the retail sector in the next six months, comes as good news for consumers.
There is absolutely no logic behind blocking FDI in retail, and as Mr Manmohan Singh had argued in his interview to McKinsey Quarterly, opening up this sector of the Indian economy would be a logical extension of the ongoing economic reforms programme.
What adds urgency to the proposal is the Prime Minister's ambitious target of setting GDP on a sustainable trajectory of 9 to 10 per cent growth per year. That target can be achieved if Mr Manmohan Singh cuts himself free from a dogmatic Left which continues to live in a world where egalitarianism equals poverty, denial and deprivation of the masses and prosperity is seen as a cardinal sin. The case for opening our doors to FDI in retail can be argued on the strength of various points.
The strongest of them is the fact that it is an infrastructure-led business that offers great potential for job creation as well as bringing in billions of dollars. Traditional retail in India has been growing at a sluggish rate - and this is probably the reason why the Left feels compelled to support it - of 6 per cent per year. In comparison, organised retail, such as it exists today in its most basic and primitive form, has been racing at a phenomenal growth rate of 30 to 40 per cent per year.
If organised retail is allowed to flourish, this sector's contribution to India's GDP, which at present averages at 10 to 11 per cent, will increase, too, and have a multiplier effect on the country's economic outlook.
The Left, of course, argues to the contrary, conveniently choosing to ignore the enormous benefits that China has been reaping from FDI in retail over the past decade. The gains should not be quantified in economic terms alone; as the Economist recently pointed out, malls, the most visible face of organised retail, also have a social impact, opening up otherwise cloistered societies to new ideas. Strangely, the BJP and the CPI(M) share a common point in blocking retail reform: Both claim it will harm small retailers and lead to loss of jobs.
That is balderdash and bad economics. The ubiquitous corner shop serves its own purpose and is unlikely to be shut down because Wal-Mart opens stores across urban India. At present, some 12 million small retailers employ 21 million people, that is, each retailer generates less than two jobs. On the other hand, a single large store generates a sizeable number of jobs and invests in employee skill acquisition and upgradation.
Consumers will be the biggest beneficiaries of organised retail because they will not only get to buy products at competitive rates much lower than those offered by traditional retailers, they can also demand and get quality goods and services, both of which are at a discount now.
India has reaped huge benefits by opening up its telecom, insurance and banking sectors. The Left had blocked FDI in all three, painting a doomsday scenario and predicting loss of jobs. We have to just look around and see how wrong the Comrades were. These three sectors alone have generated 5 million jobs. The CPI(M) may be afraid of Wal-Mart, India is not. So let's open our doors.
<!--QuoteEnd--><!--QuoteEEnd-->