Free Up Or­gan­ised Re­tail, Shed Rid­ers

Make in In­dia needs an ef­fi­cient re­tail sec­tor

The Economic Times - - The Edit Page -

The gov­ern­ment re­port­edly wants to free up for­eign di­rect in­vest­ment (FDI) in re­tail, but only for do­mes­ti­cally man­u­fac­tured goods. That shows con­fused think­ing, not re­form to en­rich the econ­omy and em­power con­sumers. The coun­try needs in­flow of for­eign cap­i­tal. Real re­form re­quires lift­ing curbs in FDI on all types of re­tail, both on­line and phys­i­cal. It will boost in­vest­ment, both in real es­tate and in man­u­fac­tur­ing, bring in busi­ness ex­per­tise, and mod­ernise the coun­try’s re­tail sec­tor. The no­tion that al­low­ing 100% FDI — only in e-com­merce and brickand-mor­tar com­pa­nies that make and sell stuff lo­cally — will boost do­mes­tic man­u­fac­tur­ing is mis­placed.

What will or will not be pro­duced in In­dia should be left to tar­iffs and in­dus­trial pol­icy, apart from in­her­ent com­pet­i­tive­ness of lo­cal pro­duc­tion rel­a­tive to pro­duc­tion abroad. The need is to freely al­low for­eign in­vest­ment in re­tail, so as to of­fer man­u­fac­tur­ers a ready distri­bu­tion plat­form. It would also end com­plaints by or­gan­ised phys­i­cal re­tail­ers over un­fair com­pe­ti­tion from on­line re­tail that re­ceives oo­dles of cash from ven­ture funds that it con­verts into dis­counts. Gen­eral mis­trust of or­gan­ised re­tail is un­war­ranted as the ben­e­fits out­weigh harm caused to small traders. Or­gan­ised re­tail chains do away with tiers of stock­ing and distri­bu­tion be­tween the pro­ducer and con­sumer. This, in turn, low­ers the cost for con­sumers, ex­pands the mar­ket and boosts tax col­lec­tions. By de­risk­ing distri­bu­tion, do­mes­tic man­u­fac­tur­ing can draw more in­vest­ment, in­clud­ing in­vest­ment by mid-size for­eign com­pa­nies that can make prod­ucts, but are too tiny to in­vest or build their own distri­bu­tion net­work.

Whether re­tail­ers should hold in­ven­tory or func­tion as a mar­ket­place should be left to the logic of com­mer­cial ef­fi­ciency, rather than dik­tat, as at present. For a va­ri­ety of goods, the mar­ket­place model is just fine and would be cho­sen by the in­dus­try of its own ac­cord. When sell­ing di­rectly to the cus­tomer by the on­line re­tailer is de­sir­able, as it might be in the case of some spe­cial­ist goods, why should pol­icy come in the way and ob­struct com­merce?

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