The cost and benefits of big-box retail

In the 18th and 19th century the enclosure movement in Western Europe came to a close. It had begun in the British Isles as early as the 15th century and even possibly earlier. It was a movement that had sought to enclose arable land that had been held in common in rural areas for the purposes of various forms of commercial agriculture.

In England it meant a shift from peasant agriculture to the profitable sheep farming. This process proved to be highly disruptive in social, economic and political terms, and in the highly evocative words of the noted American historical sociologist, Barrington Moore, “sheep ate men”.
Though the route into industrialisation and the modern world was painful, in the end these societies became prosperous, equitable and stable. In an odd sort of way India may now be facing a similar situation as it seeks to continue with the process of economic liberalisation. The vexing issue that confronts the Central government, of course, is the question of allowing foreign multi-brand retail firms to operate in the country.
The opposition to this decision has stemmed from a number of quarters. The BJP, among others, has opportunistically seized upon this issue. The party’s hostility is mostly unprincipled. Admittedly, it does enjoy support from small traders and shopkeepers. However, was it in office, in all likelihood it would have pushed through this particular reform.
A more principled but ultimately self-defeating opposition has emerged from the Trinamul Congress in West Bengal. Thanks to the toxic legacy of Communist rule for over 30 years the state is now impoverished and the home of any number of small merchants. Sensing that the entry of foreign multi-brand firms could adversely affect their fortunes, West Bengal chief minister Mamata Banerjee has emerged as their most strident and unrelenting champion. Though her constituency may now revel in her antics in the end they will rue their present glee.
The sources of opposition to the possible entry of multi-brand retail into the Indian market are obviously varied. The possible initial social costs, as happened in the enclosure movement, are also likely to be real. Nevertheless, the opposition to multi-brand retail, regardless of their sources, is misplaced. Despite some inevitable socio-economic dislocation the benefits that are likely to ensue from the entry of these firms into the Indian market could have significantly beneficial consequences and not just the urban Indian consumer alone.
What might be some of these benefits? At the outset, it needs to be underscored that close to 40 per cent of the country’s produce goes to waste annually. Much of the produce is squandered because of the lack of a viable supply chain system. Large, highly efficient multi-brand retail firms can address this problem. They have the necessary resources to build proper warehousing facilities, suitable refrigeration arrangements and adequate transportation networks. In turn, the creation of these new provisions will generate considerable employment opportunities. Workers will be needed to staff the warehouses, mechanics to maintain and repair refrigeration facilities and drivers to ply new transportation routes. Obviously, some of these tasks will require greater and lesser degrees of skill and accordingly will pay varying wages. Nevertheless, the likely employment possibilities that multi-brand retail is likely to generate are considerable.
What then is likely to happen to the millions of small shopkeepers who dot the urban landscapes of practically every Indian city? Will they be absorbed into the new employment venues that the large retail stores are likely to generate? Some no doubt will. However, many who have long been accustomed to running small, independent entities will be loath to end their freedom. Will they simply be cruelly wiped out because the larger shops will be able to provide greater choices and lower prices? In effect, will their fate be similar to those hapless peasants from the time of the enclosure movement?
Some, no doubt, faced with seemingly relentless competition, will throw in the towel and shutter their small, corner shops. However, it is far from clear that all of them will follow suit. As remains true in major metropolitan areas across the world from Paris to New York, the corner store remains indispensable to urban dwellers. They remain open on days when the vast supermarkets are closed, they keep longer hours and they develop a personal rapport with their customers. Consequently, despite the presence of a range of supermarkets these tiny shops with higher prices but more personalised service continue to thrive. Consequently, there is little or no reason to immediately assume that a dire fate awaits the kirana shops that so many across the country have come to rely on.
That said, the fears and misgivings of these shopkeepers should not be dismissed in a cavalier fashion.
Instead it is the task of the Central government, and the UPA regime in particular, to clearly explain how even in the medium term the advent of foreign multi-brand retail, despite some initial costs, are likely to prove advantageous to a swath of the country’s population and not merely the middle and upper class urban Indian consumer. Unless the UPA regime forthrightly confronts its self-serving critics and addresses these concerns the country, at large, will be the most significant loser.

The writer is a professor of political science at Indiana University, Bloomington, and a senior fellow at the Foreign Policy Research Institute in Philadelphia