India, after years of deliberation, has finally announced that it will open its $450 billion retail sector to foreign supermarket chains.
This constitutes both a courageous and much-needed step on the part of the United Progressive Alliance regime. The move required some political fortitude because a number of well-entrenched Indian business houses had opposed this move for quite some time. It was also necessary in that it signals to foreign investors that India's economic liberalization process, while slowing, hasn't completely stalled.
Despite this dramatic move, opposition to the entry of major foreign supermarket chains will no doubt continue. Ironically, the opposition will come from Indian business conglomerates who will now have to compete with major foreign players as well as from the members of India's unreconstructed political left.Enjoying this article? Click here to subscribe for full access. Just $5 a month.
Both will sing a common refrain: namely those small businesses that can't create significant economies of scale will be driven out of the market. Quite apart from the disingenuousness of large commercial firms, and the utterly predictable objections of the Indian left, there are distinct limits to this argument.
Despite the existence of enormous multi-brand retail outlets across major metropolitan areas across advanced industrial nations, neighborhood stores in urban settings have not disappeared. They have survived because they remain open at convenient hours, are located in areas which offer easy access for city dwellers and offer a degree of personal familiarity to their customers.
Small entrepreneurs across India's sprawling urban areas will, like their counterparts elsewhere in the world, find ways to adapt to the new circumstances. In the end, India's long-suffering consumers, who have paid a high price for uneven and unreliable supply chains, will stand to benefit much from the change that may be finally afoot.