The Hindu Business Line : Retail reversal

The UP government’s response to organised food retail is the symptom of a deeper malaise — the burgeoning agrarian crisis and failure of farm policy.

The provocation for the Uttar Pradesh government asking the new, large retail food stores to close is said to be mounting protests from small, unorganised retailers and trade intermediaries, who perceive large format grocery stores as a threat to their entrenched interests and livelihood. The corporate world has been eagerly making huge investments and accelerating the pace of the retail revolution despite all the noise and sporadic protests in various parts of the country , but the UP decision does put a spoke in their wheel. The political message from Lucknow is that the State government is a friend of the poor and the vulnerable. It may be tempting to condemn its action as unjustified, hasty and investor-unfriendly. But, often, political compulsions override everything else, especially if the protests have the potential to escalate into law and order situation.

That said, it would be prudent for Ms Mayawati’s government to pause and think — and take economic and political advantage of organised food retail by advancing affirmative action. Food and grocery retail is offering new employment opportunities as it drives higher farm production, improves quality and builds a more efficient supply chain. Such organised retailing can potentially transform the State’s moribund farm sector by attracting private investment. The State can actively encourage contract farming, which will bring groups of farmers together to grow what the market wants, and to maintain quality standards, with the promise of benefits that they enjoyed never before. The onus of demonstrating that the farmer has not been short-changed should be on the retailer. What about small shopkeepers? Given the skew in income distribution, there will be demand for products at almost every price point. One can sell a cake of soap at Rs 5 or Rs 15 or Rs 50 — there is a market at each one of these price points. In terms of sheer numbers, traditional ‘mom-and-pop’ retail stores will cumulatively have more customers than organised large-format retail, depending on the location. The State can help small retail stay in competition by imparting training, exploring innovative customer care methods, granting finance on easy terms for scaling up, and so on. The State’s affirmative action will go a long way in enabling and empowering growers and small retail.

Importantly, the UP government’s knee-jerk response to organised food retail is the symptom of a deeper national malaise — the burgeoning agrarian crisis, break-down of farm policies and failure to ensure growth benefits to a majority of the population. Until these real issues are addressed, socio-political disturbances cannot be wished away.

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