The Indian Economy Blog

September 16, 2008

Organized Retailing In India

Filed under: Business — Arjun Swarup @ 8:10 pm

An article of mine got published in the TCS Daily on organized retail in India (The article was first drafted in late ’06- early ’07, so parts of it might appear slightly dated) Here is the link.

Some of the comments are interesting. Here are a couple that I thought I should highlight –

With around 65% of India’s population in about half a million villages – which translates to an average of just 1400 people per village – it is very uneconomical to provide infrastructure services, barring telecommunication services (thanks to the cell phone).

India needs to move its villagers into (newly constructed) towns and villages.

5,000 new towns and cities with an average of 140,000 people per town would surely afford economies of scale. The very creation of these new towns and cities leads to lot of beneficial economic activity.
Mr. Atanu Dey writes extensively about this topic (the urgent need for new towns and cities in India) at his blog (http://www.deeshaa.org/) and there is a good video just on this topic there today.

Just for the record, I do NOT subscribe to MANY of Mr Dey’s views. But I whole heartedly endorse his thoughts on urbanization of India.

One way to achieve this is by encouraging corporate farming where the current adjacent marginal land holders become share holders of a corporation and get shares denominated in land area and are legally PROMISED a certain amount of produce (not MONEY, but produce). This amount can be based on the average yield of the past few years. This would immediately free a huge army of people from agriculture WITHOUT reducing the quantity of food grains produced.

And, as has been proven in many societies, the path to a wealthy society is through the reduction of the percentage of people dependent on agriculture.

Are India’s political leaders upto the task

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It has been demonstrated throughout history that service-oriented societies become wealthier than just product-oriented (agricultural commodities/non-ag commodities and manufacturing) societies do. Their economies are also much more resilient and sustainable, too.

Both India and China will become more dependent upon domestic trade — especially for material goods — as you say. And, as you say, that is a good thing. It shows their coming economic maturity and, as the author states, it shows that they are utilizing all of their citizen’s productivity more and more and getting higher value for it. Such positive feedback mechanisms is what happens when a society gets wealthier.

As for the US, did you know that US manufacturing output has been INCREASING all of this time that the media bemoans the ‘hallowing/offshoring out of the nation’s manufacturing’? People fall into the trap (especially Roy) of believing that just because US manufacturing JOBS are being eliminated, then manufacturing itself must be.

That’s like saying that just because 50% of the US population is no longer involved in agriculture (as it was circa 1900), we’re all going to starve.

Yes I know, unlike with the offshoring of manufacturing, we didn’t stop making corn or wheat and imported them instead. But, if we could find an alternate source of wheat a whole lot cheaper than what could be grown here, it would make the same economic sense to stop growing it as it does to simply import plastic forks instead of manufacturing them here.

And, if we had to, we could build newer, highly automated factories to start making plastic forks again. In a very short time frame, too.

We have the means of making robots that can do metal finishing, after all. And that capability keeps getting better and better. In fact, it is automation — not cheap labor abroad — that causes more losses in manufacturing here. You just don’t see the news media covering union protesters outside a plant that is installing robots. At least, not yet.

 

 


3 Comments »

  1. Hi,

    Nice article ..but would like to read the original version and not the excerpts…tried the link but i guess it’s not working …can you please look into the matter.

    Comment by Kumar Gaurav — September 18, 2008 @ 1:11 pm

  2. Reality:

    Not much is happening is the Indian retail front, most of the large format retail shops do not seems to be making any profit, and will be written off as NPA soon.

    Those of you dreaming corporate farming……. in USA it takes upwards of 17 calories of energy to produce 1 calorie of food. This is why ethanol from corn will not work in usa.

    Good news wal-mart is downsizing and starting Kirana format shops.

    Comment by Sambha — September 24, 2008 @ 6:04 am

  3. Feels good to read the corporatization of farming for the benefit! of marginal farmers. but the real issue is how much better off he is end of the day..my take is again marginal. This farmer, if not engaged in tilling is other wise unemployable for any productive sense in his “freed-up” time. He can at best be a contract farmer in his own field that assures him a daily wage for his booz, he has the right for pleasure. but then again for these farmers parting with their “profession” is an emotional thing. Even in dire poverty he loves the smell of the earth and the dung plus there are added allurement of free power and subsidized working capital loans (thats later waived off from our tax monies) that he uses to repay his perpetual high cost debts. To make things more complicated assuming, this is not state driven and state enforced mechanism, for the bastards in power, these farmers make the same gullible votebank. They would be left with nothing to “offer” in ethical and legal sense. i,e working capital for a farm thats already on lease? There would be public outcry if both the lesse and lessor are borrowing money for workling capital, the corporate entity at market rates and the farmer at politician promised rates. Well closing it short, for the kind of Governments we have in power, they would put every possible impediment to this corporatization as they know in the long term its for better and politican has no incentive for long term betterment.

    Taking a 20000 ft view on the same, US has large land holding for the mere reason that inheritance laws are such that only the eldest in the family can inherit the farm property. If we can impose the same sort of legislation in India, this solves the dual problem of poverty and populaiton for these poor breeders would have sex more for the sake of pleasure than for sake of producing babies who would have to face injustice later in property distribution. Indians at the core do well understand this language, poor or rich.

    Comment by Loknath — September 24, 2008 @ 2:01 pm

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