Manmohan Singh has ordered a comprehensive impact assessment of the advent of large-scale retail chains on small businesses and shopkeepers.
Dark clouds gather for big chains
NEW DELHI: Prime Minister Manmohan Singh has ordered a comprehensive impact assessment of the advent of large-scale retail chains, both domestic and foreign, on small businesses and shopkeepers.
Since the study is meant to form the basis for formulating a comprehensive retail policy, it could put the ambitious retail plans of large Indian business houses under policy uncertainty.
This adds to the uncertainty already shrouding the entry of multinational retail chains, such as Wal-Mart, into India.
In a letter to the Department of Industrial Policy and Promotion (DIPP), the PMO has asked for a comprehensive study which covers not just transnational supermarkets but major Indian business houses as well.
While Congress president Sonia Gandhi’s letter to the PM last month asked merely for an assessment of impact of the entry of multinational retailers over smaller businesses, the PM appears to have expanded the scope of this assessment.
In a letter written just last week (a copy of which is available with DNA), the PMO says, “The PM has desired that that DIPP may commission a study of the possible impact of large-scale retail operations, either by transnational supermarkets or major Indian business houses, on small-scale retailers and vendors.”
Does this mean that a comprehensive policy on retail is in the works?
While a detailed policy document could help formulate clear guidelines for future entrants into the retail sector, it could also change some rules of the game for existing retail chains by large business houses such as RIL, Kishore Biyani’s Future Group and the upcoming retail operations of Bharti Enterprises.
These retailers have committed mega investments for scaling up retail operations and have been assuring the government about their support to the smaller retailers, mom & pop stores.
Reliance, for example, has set up a chain of wholesale stores, which services push-cart vendors, other small and big retailers. The proposed Bharti Wal-Mart JV is seeking to provide similar linkages to smaller retailers and kirana stores.
Admonishing the DIPP for not responding to the specific issues raised by Sonia Gandhi in her communication earlier, the salvo from the PM emphasises the need for this study to come up with results that “could be a guide to policy making in this (retail) sector.” The timeframe for the completion of the study should be reasonable so that it can feed into policy making in the near future, it said. Such a study is also expected to give its assessment on the contentious issue of opening up the retail sector further.
At present, while 51% FDI is allowed in single-brand retailing, some big global retailers have chosen to sit on the fence till a clearer policy picture emerges.
Even the ongoing negotiations between Bharti and Wal-Mart for cash & carry wholesale operations, logistics and supply chain could face a temporary cold storage till the government is ready with a comprehensive policy on retail.
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