'Upgrade trade, but take care to minimise the pain'

  • HT Correspondent, Hindustan Times, New Delhi
  • Updated: Nov 17, 2012 02:08 IST

India's policy makers face the daunting challenge of minimising the cost of displacement and loss of jobs and incomes while ushering in modern retail trade in the country, eminent economist Erik Jones said on Friday.

"The daily life gets altered. Organised retail trade eliminates the practice of daily contact between the consumer and the retailer," Jones said on the sidelines of the Hindustan Times Leadership Summit here.

"It's a major challenge for India's policy makers. The fear of job loss is real and the public debate is legitimate," said Jones, director of European Studies at the Paul H Nitze School of Advanced International Studies and director at the Bologna Institute of Policy Research, Johns Hopkins University.

In September, the government had allowed foreign direct investment in the retail sector, which led Mamata Banerjee-led Trinamool Congress to withdraw support to the UPA government. Opposition BJP and Left parties have threatened a no-confidence motion against the government in the winter session of the Parliament that begins later this month.

The new policy framework for FDI upto 51% in multi-brand retail empowers state governments to define their own set of rules for foreign retail giants' entry into their respective geographical territories.

"Italy has a long tradition of mom-and-pop stores," Jones said. "In Italy the most profitable stores are the mid-sized grocery stores-slightly larger than the mom-and-pop stores."

"In the UK, the advent of large modern retail stores has devastated mom-and-pop stores," said Jones. "This is a siginificant public policy challenge for which there are not one set model to chose from."

Echoing Khanna, Jones also said "highly developed societies can also be highly corrupt."

"Corruption, inefficiency and lack of governance in public systems are dominant in most societies, including China," he said.

"In Italy, we have had a series of corruption scandals. We have had situations where criminals were sitting in Parliament," he said. "Lack of transparency is not limited to India and Italy. The practice starts off innocently, but gradually develops into what is called negative equilibrium."

Jones said that while India and China follow different development models, "the Indian model is empowered with much more macro-stability than China."

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