Foreign brands can't be prime drivers of retail

The four years after the 2008 crisis have been possibly the worst the retail sector has faced in recent decades, whether in terms of total losses or the quantum of lost growth.

On its part, the government has not done much to encourage the sector. After several policy flip-flops, approving investment proposals of some high-profile global brands is a positive signal to the outside world, but none of them so far have unlocked or grown the value of Indian retail businesses in any significant way.

Foreign brands and retailers can and should be an integral part of India’s developing retail landscape, but they cannot be the prime drivers of retail or the saviours of the supply chain. That energy needs to come from within, and the resultant growth will benefit all – Indian and international companies, consumers and the government.

From the ancient treatise Arthashastra, Professor Thomas Trautman quotes the concept of “shad-bhaag” (the state having one-sixth share) as “entrepreneurial” because it has a sense of mutual interest, promoting production and the growth of everyone’s share. This spirit of co-ownership and entrepreneurial participation is largely missing in today’s governance. Direct and indirect taxation remains a complex net for all but the savviest evaders, not to mention all the other regulation and approvals that each business needs to meet.

The wish-list is not large, but needs some bold steps: enact policies that free up unproductive real estate to reduce costs, reduce regulatory hurdles, remove tax traps and reduce import duties. For instance, one estimate for illegal imports in watches is 75%, where the beneficiaries are the smugglers and those who oil the wheels for them. It is an important Budget year politically due to impending elections but also economically due to the dismal GDP growth. The animal spirits that the Prime Minister referred to recently are more in the nature of a “bheegi billi” right now rather than a roaring tiger. The caged golden bird will not lay any golden eggs. Will the finance minister choose to crack the whip this year, or cut the chains? We watch with bated breath.

The writer is chief executive of Third Eyesight, a specialist management consulting firm