Reform in IndiaLet Walmart inIndia’s government should favourshoppers, not the middle men who servethem so poorlyOPTIMISTS...
Reform in IndiaLet Walmart inIndia’s government should favourshoppers, not the middle men who servethem so poorlycomplacen...
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Transcript of "THE RETAIL ISSUE.....IN INDIA"

  1. 1. Reform in IndiaLet Walmart inIndia’s government should favourshoppers, not the middle men who servethem so poorlyOPTIMISTS reckon that India’s trajectory is self-correcting. Its messy democracy may notgive it the sense of purpose that China’s one-party state does. But if the economy gets wobblyenough, the politicians will eventually react, pushing through painful reforms that will keepIndia’s miracle intact. That cheery logic is being put to the test this week, as a proposal to letforeign supermarkets into the country has provoked an almighty row. The government musthold its nerve, for what is at stake is not just where India buys its onions, but whether it isable to make hard choices.The opening, announced on November 24th, is only partial. Multi-brand foreign chains, suchas Walmart and Tesco, must operate as joint ventures, of which they may now own up to51%, and may operate only in cities of 1m people or more. But this should still shake thingsup. Indian retailing is backward. Stores are tiny. Supply chains are rickety and shockinglywasteful. Perhaps a third of vegetables rot before reaching a plate. Foreign firms will makelife harder for small shopkeepers and middle men. But their cash and know-how could helpmodernise Indian farming and move crops faster from fields to shopping baskets. That wouldcurb food prices, benefiting the poor and easing India’s stubborn inflation (see article).The new reform is timely. Growth has dipped below 7%. The rupee is weak, investors arenervous and business folk are livid about red tape. India’s troubles do not compare with thecrisis of 1991, which spurred it to liberalise after decades of stagnation. But still, thegovernment needs to lift confidence, and retail liberalisation could work like a bargain bag ofyeast.Yet the political reaction has been furious and xenophobic. A party boss in Uttar Pradesh,India’s most populous state, has promised to defend small shopkeepers by torching Walmartstores. Perhaps half of India’s states say they will refuse to implement the reform, as is theirright. Trade unions have promised strikes. Parliament has been shouted to a standstill.Already there is talk that the government might back down.All lost in the supermarket?A chunk of the blame lies with the main opposition party, the BJP. A decade ago it favouredeconomic opening, even of retailing, and celebrated India’s capitalist boom. Now it is ashoddy outfit, blocking change purely to weaken the government and discounting the nationalinterest with even more zeal than the Beast of Bentonville discounts tomatoes.But this is also a mess of the government’s making. A coalition dominated by the Congressparty, it is led by Manmohan Singh, who serves as prime minister by approval of SoniaGandhi, Congress’s hereditary chief. He is a technocrat who helped pass the reforms of the1990s. But for the past few years Mr Singh’s administration has seemed exhausted. The
  2. 2. Reform in IndiaLet Walmart inIndia’s government should favourshoppers, not the middle men who servethem so poorlycomplacent belief that a double-digit growth rate is India’s birthright appears to have takenhold. Had the government consistently made the case for reform—and acted boldly on issuesfrom land reform to subsidies—it might not be so bullied today.But now that it is, it must fight its corner. The retailing reform does not require parliamentaryapproval. The government should refuse to back down, and argue, loudly and often, that itstands with shoppers, not with the middle men and shopkeepers who serve them so poorly.India’s future as an open, competitive economy will not be decided in the supermarket aisles.But this is an important battle nonetheless.