Return of the Dangchibabus
The car-borne city dweller will be the biggest beneficiary of FDI in the retail sector.india Updated: Dec 03, 2011 00:47 IST
Long, long ago, in an India which now seems improbably quaint, there were Dangchibabus. They were prosperous citizens of pre-Independence Calcutta who made annual migrations upcountry in search of a therapeutic change of air. They draped expensive snuff-coloured shawls over their shoulders and took the train to private retreats in rural idylls like Deoghar and Madhupur, in what is now Jharkhand.
There, they were amazed at the ridiculously low cost of mofussil living. "Damn cheap! Damn cheap!" they exclaimed, as Bengalis still do when they encounter cool bargains. The unlettered masses upcountry heard 'damn cheap' as 'dangchi'. And the babus who prized this mysterious substance were christened Dangchibabus.
Almost a century after his extinction, the Dangchibabu is about to be reborn. Once confined to the east, he will now be a free-ranging national animal. Last year, the government had raised the fraught issue of liberalisation of retail, including foreign direct investment (FDI) in multi-brand retail. This year, the pre-Budget Economic Survey had supported liberalisation. And Pranab Mukherjee had said that the question was not whether retail should be opened up to FDI, but when it should be done. That was then. 'When' is now.
Who benefits from FDI in multi-brand retail? Everyone including your dog, says the government with a win-win smile. True, but win-win stories hardly ever tell the whole truth. Farmers and small enterprises can benefit by cutting out greedy middlemen, but they risk getting locked into long-term commitments without guarantees which may skew production patterns and eventually hurt them. Grocers can profitably resell deep-discounted goods from supermarkets but equally, they can be wiped out by predatory pricing. Cold chains and grain storage set up by supermarkets would reduce produce wastage. But this would only make a marginal difference since the biggest wastrel is the government, with its antiquated procurement and storage systems.
Only three stakeholders are clear winners here. Big business, which is complaining of a credit squeeze and policy paralysis, will obviously get a boost. Political parties in government can show a spurt in growth - not just statistically but also visually, in the form of massive new infrastructure. Visuals are valuable. They can be sold politically. That is why parties usually support FDI in retail when they are in power but oppose it otherwise. The growth dividend would be especially useful for the current government, offsetting a slowdown caused by expensive credit, decreasing inflows and inflation.
The government can also take credit for creating jobs. But in a nation of shopkeepers, talking of jobs rather than livelihoods is dodgy. Retail is the second-biggest employer after agriculture, providing about 35 million livelihoods and producing 5-10% of GDP, by various reckonings. A fraction of these teeming millions would find jobs in the formal sector but the livelihoods of the rest would be threatened. Politically, it doesn't matter. By the time this happens, the current controversy would have been forgotten. Anyway, retail is a state subject, so state governments would take the blame.
But the biggest beneficiary is the car-borne city dweller, the hypermart's favourite creature. He can travel in search of retail therapy, seeking out deals, and he has the horsepower to cart them away. He is the born-again Dangchibabu of the 21st century.
Pratik Kanjilal is publisher of The Little Magazine. The views expressed by the author are personal.