The government’s discussion paper on allowing foreign retail chains to set up shop in India makes a fairly compelling case. The world’s second largest producer of fruits and vegetables loses a quarter of its produce between the farm and the table. Likewise, nearly 7 per cent of Indian grain rots in fields and granaries. The refrigeration that would preserve all this food is non-existent — only one in seven tonnes of our veggies goes through cold storage. Foreign investment in cold chains hasn’t materialised because India denies their developers access to retail sales. The most immediate way to raise farm productivity would involve allowing the Wal-Marts and Carrefours to open their vends with deep back-end infrastructure that can contain this horrible waste. The buyer benefits from lower prices — runaway food inflation is likely to settle well above 10 per cent this year. The farmer benefits from higher realisation — Indian farmers get a mere third of the price the consumer pays in contrast to two-thirds of the final value earned by their counterparts in countries that have big buyers. And the global retail chains get access to a $450 billion market that is growing at nearly 9 per cent a year.
The obvious question is why are we still floating discussion papers? India has 33 million reasons against this no-brainer. The number of retailing jobs the foreign chains threaten constitutes a powerful argument against their entry. The paper has set out the views of a parliamentary committee that is wary of organised retail because of the immense labour dislocation it entails and the potential for abuse by dominant players. Hence the suggestion for a gradual opening up of the sector. The points on which the department of industrial policy and promotion has sought feedback are indeed an attempt to create safeguards against our deepest fears about Big Retail. Should foreigners be allowed? Should they be obligated to commit a part of their investment to supply chains? Should they be made to hire workers from the countryside? Should they be required to sell a part of their wares to local grocers? Do we need a regulator for supermarkets?
India’s initial experiences with organised retail haven’t been pleasant. Opposition from the trading community has forced local chains to put expansion plans on hold. Their foreign partners have been watching the politics play out. Yet, India desperately needs to pull itself out of a vicious cycle of low farm productivity. The next Green Revolution is waiting to happen if we can stop 1 per cent of our GDP from spoiling before it reaches the dinner plate.