Walmart, the humongous American retail store chain, has decided to expand in the Indian market. Walmart is a known economic entity in 28 countries, with 63 brand banners. From groceries and provisions, to electronic goods, travel equipment, garments and furniture, it has it all. The global retail giant has 21 operational outlets in India at present. It plans to set up 50 new additional stores within the next three to four years. Investment marked for each new store is in the range of $10 million to $12 million. A surge in economic activity in India’s retail sector is bound to be observed with Walmart’s expansion. The decision for new Walmart outlets in certain cities in states of Telangana and Maharashtra has already been taken.
There are other established brands operating in India’s retail sector. Metro, More, Westside, LuLu Hypermarket, Reliance Retail, Spencer’s and Arambagh’s Food Mart are notable entities, among others; additionally, there are sundry malls, which have various shops offering goods and commodities. All have their respective outlets, scattered in various cities and towns of the country. Some are larger chains than others. Some are concentrated in certain regions of the country. But, all are well established within the huge Indian market, having successfully carved out their niches. Like Walmart, other players also appraise the possibility to expand in favourable areas.
Comparative advantage in trade is a revolutionary and enduring concept. It was first propounded by David Ricardo. He was a wealthy businessman from London who undertook effective scholarly work in economic theory and formulated this concept in the early nineteenth century. Its application in trade relations and its generic and contextual relevance continues unabated. Most economic policy-makers, businessmen, industrialists and many politicians are in broad agreement regarding the continuing validity of this concept.
It explains how beneficial economic activity can occur even when one economic entity or firm is comparatively less efficient, or in absolute disadvantage than other firms, in undertaking economic activities. The less advantageous entity should specialise or expand in ways and areas where its disadvantage is minimal, and cede space to others, elsewhere.
The concept of comparative advantage has stood the test of time. Regarding trade flows and trade competition, voices have often been raised of the unfair positioning of certain economic entities compared to others. By forwarding arguments, marked by welfare sensitivities and emotive statements, lobbies and interest groups have agitated for cessation of enterprising economic activity in certain arenas. But, the flat reality is that such approaches have never presented any viable alternative framework.
Ethics, accountability and ensuring a framework for fair competition are imperatives. Nonetheless, unnecessary decelerating or thwarting economic activity or trade does not offer solutions. Comparative advantage provides a realistic and effective way for continuing of economic activities among economic entities of varying heft.
Walmart has announced its decision to invest Rs 900 crore in Maharashtra. It would open about 15 modern cash-and-carry wholesale stores in the state. Consequently, there would be 30,000 direct and indirect jobs created.
As it expands, other retail entities — domestic and international — are bound to draw up plans for expanding. It would boost organised job creation and gainful employment.
The author analyses international affairs
