India's progress cannot be measured by the footfalls in the malls. That may be stepping on the livelihood of more than 30 million small and medium traders. Instead of allowing large retail chains, the Government can try to make the lives of the marginalised segment easy, says R. VAIDYANATHAN.

R. VAIDYANATHAN

The flavour of the season is retail. Favoured by the planners and the Government, it is eagerly awaited. One group of experts feels that as long as it is not driven by Foreign Direct Investment, it is fine while others feel that without FDI the revolution may not be of global standards.

But not many seem to be worrying about the millions of retail traders who will get marginalised in this new era of inclusive reforms.

From the Table, it is clear that trade (wholesale and retail) constitutes one of the largest segments of the economy. It is next only to agriculture and has as much share as manufacturing. With a GDP of nearly Rs 33 lakh crore for the last year, the share of trade at 15 per cent is nearly Rs 5 lakh crore. That should give an idea why so many want to jump onto the retail bandwagon. It is the best aspect of the economy growing at a compounded annual growth rate (CAGR) of more than 8 per cent. Even a conservative estimate of 20 per cent margin on this value-addition, means Rs 1 lakh crore which will make any domestic or global player drool about the projected income statement.

How many are involved?

There are no reliable numbers on the families or individuals employed by the trade sector. The figures provided by Government in the Economic Survey are laughable as, according to the document, in 2004, 3.51 lakh persons were employed in the private sector wholesale and retail trade in the country (Appendix Statistical Tables Table 3.2 of the Economic Survey 2006-2007). According to the same table, the figure was 3.60 lakh in 2003. Perhaps, one region of a Metro would have three lakh people in wholesale and retail trade. And, if indeed the Survey estimate is right, then the per capita value addition in this sector is more than Rs 1 crore, an unheard of figure any where in the world for any sector.

According to a 2003 State-wise survey by the Labour Ministry, there were more than 45 lakh shops employing more than 30 lakh persons. There are nearly nine lakh commercial establishments employing nearly 32 lakh persons. Including restaurants, the survey estimates nearly 70 lakh persons engaged in these activities. This is an under-estimation as it does not fully cover all States and Union Territories or establishments where the owner is also the employee.

Census 2001 provides more elaborate data. According to it, there were 269 lakh `main' and 24 lakh marginal workers in wholesale and retail trade. That is, nearly three crore people depend on trade, 1.1 crore in the urban and 1.9 crore in the rural areas. Of the total, nearly 1.7 crore are not even matriculates.

Thus, the livelihood of more than 30 million is involved and if we count the dependants, in the form of children and others, at least 120 million will be impacted by the retail revolution.

Retail Revolution Impact

First, the real-estate. Prime land are occupied, and in some cases even retailers evicted to construct major malls. This will be a body-blow to the small and medium retailers. Two, improvements in technology and introduction of software. As if a computer-generated bill is the panacea for all our problems when the local shopkeeper can add and multiply in a jiffy.

Three, it is suggested that these new malls will be open for longer hours. But, already, local retailers keep shops open for more than 16 hours a day, 24X7.

Rather than allowing retail MNCs, the Government could focus on empowering the small retailers, for instance, by providing credit. Much of the fund requirement of the retail trade is not met by banking channels, but by non-institutional players such as money-lenders. It should also end the various types harassment that extracts a heavy Rs 15,000 crore in rents.

Road-side vendors and hawkers also face the problem of zoning. Clearly, the important economic function and the substantial entrepreneurship provided by the wholesalers/retailers are neither recognised nor appreciated.

What is to be done?

The Government should make credit availabile to the unorganised traders through institutional channels, if needed by fixing targets. It should facilitate modernisation of spot markets and link up the retail chain using such technologies as telecom and the Internet.

The zoning system should make space for hawkers and other petty traders.A ministry exclusively for domestic trade should be created.

Last but not the least, let the reformers understand that the retail trader in his fifties with a low level of education and who is probably deep in debt does not have any interest in this revolution.

At a recent seminar, a retail expert mentioned that the progress of India will be measured by the "footfalls" in malls. There was applause. Have we, then, sold our civilisational soul to the well-heeled sole?

(The author is Professor of Finance and Control, Indian Institute of Management-Bangalore, and can be contacted at vaidya@iimb.ernet.in. The views are personal and do not reflect that of the organisation.)

(This article was published in the Business Line print edition dated March 8, 2007)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.