Retailing promises

After opposing the sale of shares of BHEL, now the Left has taken up the task of opposing government policy on FDI in retail. In its drive to protect the local trading community, it is overlooking the essential fact that in India today there is an urgent need to bring retail marketing into the organised sector. Apart from new technology and lower costs due to better supply management and procurement policies, which bring obvious advantages to the customers, a modern retail sector is a tool to attack the black economy as well. Whenever there is a cash economy it becomes easy for both parties to hide the transaction and escape paying taxes. The way out is to increase the share of the formal sector and reduce the component of the cash economy. While the local shop does not provide a receipt, the supermarket does. Today, wholesale plus retail trade constitute 14 per cent of GDP. This can be a significant source of tax revenue for the government. The efficiencies offered by foreign companies will help put pressure, reduce prices and improve services which will assist the organised sector to win over the unorganised sector.

The Left may argue that it is not opposing modern retailing — that it is not stopping Indian companies from going into the retail business. Many Indian companies have entered the field and are doing well. However, preventing FDI in retail will give protection to these companies. If the Left believes that these are infant industries and proposes that for the next, say, two years, they prefer that the Indian industry in the sector be protected, they should say so clearly. In the name of protecting local shopkeepers, it is effectively asking for protection for domestic big business.

And last, and surely the Left will agree with this argument, is that labour conditions in the organised sector are much better than in the unorganised sector. The number of hours worked, facilities provided to workers, overtime rates, and so on, are better for organised sector workers. Indeed, one would have thought the Left, which has been lamenting the lack of growth of jobs in the organised sector because of which they call the growth of the economy “jobless growth”, would have welcomed the growth of employment opportunities in the organised sector. Given these advantages, the government should stand firm in its proposal to open up FDI to retail.