Column

The buzz of the times is the retail revolution — a revolution applauded by planners, encouraged by the government and eagerly talked about by experts crying themselves hoarse over whether or not it should be FDI-driven.

Not many seem to be worried about the millions of small retailers who will get marginalised in this era of so-called inclusive reforms.

Trade (wholesale and retail) constitutes one of the largest segments of our economy. It is next only to agriculture and has as much share as that of manufacturing.

With a GDP of nearly Rs 33 lakh crore for last year, we find that the share of trade at 15% is nearly Rs 5 lakh crore, which tells us why every business house wants to be a part of the revolution.

It is the juiciest aspect of our economy, which has been growing at a compounded annual real growth rate of over 8%. Even assuming a conservative 20% margin on this value addition, we get Rs 1 lakh crore, which is enough to have any domestic or global player salivating.

Unfortunately, we do not have any reliable numbers on the number of families or individuals employed by the trade sector.

The figure thrown up in the Economic Survey is laughable since it mentions that 3.51 lakh persons were employed during 2004 in the private sector wholesale and retail trade (Appendix Statistical Tables — Table 3.2, Economic Survey - 2006-2007). According to the same table, the number was 3.60 lakh during 2003.

At any rate, it is common knowledge that the actual number is many times more than this. Indeed, it would be over a lakh in just one suburb of Mumbai, not to mention the whole city. Wonder how, no Member of Parliament ever moved a privilege motion on such fictitious numbers submitted to the Parliament.

A 2003 state-wise survey by the ministry of labour suggests that there are over 45 lakh shops employing over 30 lakh persons. Then there are nearly 9 lakh commercial establishments employing nearly 32 lakh persons. Including restaurants, it suggests that there are nearly 70 lakh persons in all, earning their livelihood from these activities.

We think even this is an underestimate since it does not fully cover all states and UTs and also the establishments wherein the employee is also owner.

Census 2001 provides more elaborate data. It says there are 2.69 crore main workers and 24 lakh marginal workers in
wholesale and retail trade, implying a total of nearly 3 crore. Of this, 1.1 crore are in urban areas and 1.9 crore in rural areas. Of the total, nearly 1.7 crore have not completed their matriculation.

Include those dependent on these 3 crore workers, and the number of people who would be directly impacted by the retail revolution would easily touch 12 crore.

But, just what does this retail revolution involve? It has three major components. First, the real estate sharks will occupy prime land and in some cases evict the retailers and construct major malls.

Second, retail stores would spring up in household premises, storing colas by the litres and toilet paper by the bundles - this movement of retail stores into individual households would be a major revolution.

The third aspect is the razzle-dazzle of chilling out in cool environs and buying things that may not be even remotely useful.

The argument given is with respect to improvements in technology and introduction of software - as if a computer generated unreadable bill is the panacea for all our problems when the local shopkeeper can multiply and add in a jiffy.

It is also suggested that these new malls will be open for longer hours. This argument may be useful in the West where they close shops for Sundays and also close early. Here, the local retailer keeps it open using his family labour for more than 16 hours per day and on all days. Global chains like Wal-Mart have not succeeded in Germany or Japan since these countries have well-developed regulations and local competition to protect community-based local shops.

A large portion of the credit requirement of the retail trade is not met by banking channels today. The credit requirement of this sector would be at least Rs 4 lakh crore since most capital in trade is working capital and not more than Rs 1 lakh crore comes from institutional credit.

The major portion of financing of trade is done by non-institutional players like moneylenders. The planners should address this issue, rather than on getting major real estate agents to enter into retail trade.

The harassment from the minions of the state machinery like police, municipal authorities, check-post officials, labour department, weights and measurements etc (the list includes at least 50 agencies) and the bribe paid is mind boggling. At a conservative estimate of 5%, we find that at least Rs 15,000 crore is the bribe received by various government extortionists.

The street-side vendors and hawkers have the additional issue of zoning problems since the fact that they play a very important economic function and have substantial entrepreneurship is neither recognised nor appreciated by the metropolitan elite.

The pressure on the illiterate retail trader will be very large. He will borrow at atrociously high rates to repay his past burden and in the absence of any social security net, will resort to suicide.

The government, including the Prime Minister, has been talking of improving the living standards of SC/ST and OBCs and Muslims. It is pertinent to note that substantial portions of Muslims who are into business are in retail trade. In a sense, one part of government does not seem to know what the other part is doing. The impact on the community will be phenomenal. Also, a large number of retail traders is in the forties and fifties and the issue of getting re-trained to move on to other avocations will be impossible.

On account of all this, there is an urgent need to form a ministry exclusively for domestic trade.

Last but not the least, let the reformers — many of whom are beneficiaries of pension from global institutions — understand that the retail trader in his fifties, who is illiterate and who has borrowed at exorbitant rates, and who has to bribe on a daily basis, does not have a future in this revolution.

In a well-attended seminar sometime ago, a retail expert mentioned that the progress of India will be measured by the “footfalls” in malls. There was applause. It shows that we have sold our civilisational soul for the cause of the well-heeled soles. Tomorrow’s headlines are going to be regarding suicide by retail traders. About that, you have read here first.

vaidya@iimb.ernet.in