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It was good to hear Kamal Nath hint 8212; he was speaking at the Hindustan Times Leadership Summit last weekend 8212; that FDI in retail may be further liberalised. But it also redirected attention to how sclerotic India8217;s policymaking system can be. Allowing FDI in retail should have been an open-and-shut case. But two governments 8212; the NDA and UPA 8212; have agonised over it for years and currently all that is allowed is 51 per cent FDI in single brand retail chains. That an excess of carefulness is still the norm was evident even from a reformist minister like Nath. He added a rider to a more liberal retail FDI regime 8212; the government8217;s wish that large retail chains would act as suppliers to smaller shops and that the latter8217;s business should not be damaged. This indicates, and the minister said as much, that large retail stores should function more as bulk suppliers, especially handling cold chains.

Whether or not such liberalisation attracts big names in retail FDI, the results would be sub-optimum. Large retail works on the principle of giving consumers the value that comes from an efficient sourcing and distribution network. Making them act as sort of wholesalers more or less defeats the economic point. The considerable employment potential that retail FDI carries with it will also not be realised. Many thousand jobs will be created if FDI in retail is allowed full operational freedom. Many more will be created through backward linkages 8212; many retail MNCs would want to source a lot of their products locally if they are allowed to bet large and bet freely on millions of Indians8217; rapidly growing purchasing power.

Policymakers have never answered why mom and pop shops are not threatened by domestic industrial groups setting up large retail stores or chains. That India is getting home-grown branded retail is great news. But why the persistent false argument against foreign retail companies? More so when evidence from many countries suggest that small, independent stores survive alongside large retail chains. Often the two kinds of outlets serve different clientele/needs. Of course, there will be some disruptions. But every economic reform India has undertaken has disturbed the status quo and changed things for the better. Retail FDI will do the same.